UPDATE: Stifel Nicolaus Initiates Zynga with Buy; Strategic Value Not Reflected in Market Valuation

Stifel Nicolaus initiates its coverage on Zynga ZNGA with a Buy rating and a price target of $8.50. Stifel Nicolaus comments, "Our Buy recommendation is based on three core principles: 1) Strategic Value: Zynga comprises 19% of Facebook's revenues and would give a strategic buyer like GOOG or MSFT a foothold in social media; 2) All else equal, Zynga is more likely to launch a hit title than its peers due to its clever marketing practices and existing market share on the FB platform; and 3) The popularity of social games continues to increase, even if game play shifts to mobile devices. Our $8.50 target price assumes that shares trade back to a 10x EV/EBITDA multiple, using 2013 estimates, with modest downside from current levels." ZNGA closed at $5.77 on Tuesday.