It turns out my timing could not have been better. The stock bucked a decidedly bearish trend to blow past the psychologically important $5 mark. Zynga reports earnings on Wednesday. If it beats, raises guidance or shows its hand a bit more with regards to online gambling, a move into double digits in short order is not out of the question.
As I explained in the above-cited article, Zynga has several strong constants -- no debt, massive revenue and a first-mover advantage -- as well as many potential catalysts that could burn traders and investors with short positions in the stock. There's no question that short covering fueled a good bit of Monday's move past $5.
That said, do not mistake my ZNGA bullishness as a call to go all-in. It's still a highly speculative and volatile stock, especially around earnings, a time when you should always proceed with caution. An earnings miss or lowered guidance could send the shares reeling to new all-time lows.But I hope readers take something more universally applicable away from my ZNGA bull case. Just as you have to be careful going long a stock like ZNGA, you must keep potential catalysts in the back of your mind that could make it fly on a moment's notice. Often, the media and, in turn, investors overdo bearishness in a stock like ZNGA. These misconceptions of reality can burn you if you're short or keep you away from one of the market's better long-term plays. Assess the bearishness like anything else, but don't let it cloud all objectivity.