Zynga Inc. (NASDAQ: ZNGA) is no longer a very loved company. The social game maker has lost its favorable outlook largely as it and Facebook Inc. (NASDAQ: FB) try to distance themselves from each other. So when you see an analyst upgrading the stock, it may raise some eyebrows.

Bank of America/Merrill Lynch raised its rating to Buy from Neutral, citing Zynga’s asset value and mobile stabilization. Its price target was raised to $3.40 from $2.70.

The firm does caution:

While our upgrade could be early with bookings expected to decline quarter over quarter in the first quarter, and our below-Street 2013 estimates, we are upgrading Zynga to Buy due to the following: 1) valuation now reflects downside risk to bookings with $2.20/share in cash over assets, a $200 million per year poker business, and $150 to $200 million mobile business likely supporting the stock; 2) ZNGA’s mobile trends may have stabilized (per comScore user data), and for PC there is option value for an inflection in players in 2013 driven by new categories (gambling and core); 3) recent 60-day performance of ANGI, FB, GRPN, and P suggest investors’ risk tolerance with developing business models has increased; and, 4) FB’s 10-K disclosure suggests $15 to $25 million upside to fourth quarter guidance and our prior bookings estimate.

BofA also noted that social gaming trends remain weak and bookings may not bottom in 2013.

While BofA has raised its fourth-quarter estimates, the firm is still below Wall St.’s consensus in 2013. The firm is raising its 2013 total bookings estimate to $895 million from $825 million, EBITDA to $20 million from -$45 million, and adjusted “LPS” to $0.09 from $0.15. Its revenue projection for 2013 is $980 million, versus $1.06 billion.

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