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Why Zynga Is Up 40% in 3 Days

By Erin Kennedy and Evan Niu, CFA – Feb 4, 2014 at 9:15PM

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Zynga has enjoyed a nice few days. Shares are up considerably after the company reported earnings alongside a promising acquisition, and getting another boost from an analyst upgrade.

It's been just three trading days since social game maker Zynga (ZNGA) reported earnings, yet shares had gained 40% at today's high. Not only were investors optimistic about last quarter's results, but shares also got another boost today in the form of an analyst upgrade. UBS has upgraded the stock from "neutral" to "buy" while similarly pumping its price target from $4 to $6. CEO Don Mattrick is starting to put a turnaround together, starting with cost-cutting and the $527 million acquisition of NaturalMotion.

Many investors may be tempted to remember the botched acquisition of OMGPOP, which took only six months for Zynga to recognize its mistake. However, NaturalMotion has innovative technologies such as its Euphoria animation engine that powers numerous popular gaming titles among different platforms. Euphoria is one of several possible licensing opportunities that Zynga has going forward, and the foundations of a turnaround are now visible. Still, Zynga will need to get past its image as a shameless copycat if it ever wants to win investors back.

In this segment of Tech Teardown, Erin Kennedy discusses Zynga's rally with Evan Niu, CFA, our tech and telecom bureau chief.

Neither Erin Kennedy, Evan Niu, CFA, nor The Motley Fool has a position in any of the stocks mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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