Zynga Strong on Online Gaming Hopes, Yahoo Takeover

Shares of Zynga

surged on Monday, up over 8%. The closing of popular online betting website InTrade, combined with optimism for online gambling, may have contributed to the rally. There were also reports that Yahoo

could consider purchasing the company. Over the last three months, shares of Zynga are up more than 50%. Initially, Zynga was seen as a play on the emerging social gaming space. After all, the company built itself on hit Facebook

games like Farmville and Words with Friends. But with the popularity of social games waning, Zynga shares plummeted; falling as low as $2.09 (after pricing its IPO at $10). However, in recent months, Zynga has found new life as a casino name. Last August, Zynga hired Maytal Ginzburg from 888 Holdings -- a foreign gambling website. With Nevada and New Jersey moving to legalize online gambling, investors may be hoping that Zynga can transfer its social gaming expertise to online gambling. Caesars Entertainment

is widely considered to be the other company most exposed to online gaming. Last year, Hedge fund magnate John Paulson argued that investors should consider getting into the name as an online gaming play. Caesars' shares rallied nearly 2% Monday. In addition, an analyst at Wunderlich Securities named Zynga as a possible takeover target for Yahoo. (AllThingsD reported last week that Yahoo is in the market for two “significant” acquisitions.) However, Wunderlich said that Yelp

-- not Zynga -- was the most likely buy. At any rate, Zynga is one of the Nasdaq's strongest performers on Monday, hovering near $3.85.