The stock prices of both Facebook Inc. (NASDAQ: FB) and the game company Zynga (NASDAQ: ZNGA), which has relied on Facebook traffic, have risen in lock-step over the past five days. Each is up 8%, compared to a 2% rise in the S&P 500.
The link seems odd, since Zynga’s games have gone out of favor, even with the huge distribution platform Facebook offers them. New Zynga games are nowhere near as successful as its big hit, Farmville. Zynga also has run through senior management people. And Facebook has received several analysts upgrades that Zynga has not. Investors believe that the market for social-network games has become crowded, and that this is even more true on mobile devices than personal computers.
But Zynga’s shares are off from a 52-week high of almost $16 to $2.40. Investors who enjoy risk might believe that, at its current extremely low valuation, it can drop no further.
Douglas A. McIntyre