Candy Crush maker
King Digital Entertainment
) shares surged 15.13% ($2.70) to close at $20.55 on Jun 30, 2014,
following positive comments from a couple of analysts. This was
King Digital's biggest one-day gain since its Initial Public
offering (IPO) in March this year.
Per Bloomberg, JPMorgan & Chase analyst Doug Anmuth in a recent
note to investors said that King Digital's strong estimated free
cash flow ($800.0 million in fiscal 2014) will enable it to return
cash to investors. The analyst also noted that "upcoming game
launches will also lead to growth and revenue diversification".
Another analyst, Michael Pachter, of Wedbush Securities gave
positive comments buoyed by strong bookings and profit of flagship
Candy Crush Saga
, which accounted for 67.0% of the company's gross total bookings
in the first quarter. Although Candy Crush Saga bookings are
expected to decline, the analyst believes that new games will be
able to offset it in the near term.
King Digital's IPO was worst to date in 2014, primarily due to its
Candy Crush Saga
, a free to download game available on
) app stores. However, King Digital's growth prospects improved
somewhat after the company reported a better-than-expected
Gross bookings surged 193.0% year over year to $641.0 million. The
strong results were driven by higher gross bookings from
Farm Heroes Saga
following its mobile launch in Jan 2014. The company had 481
million average monthly unique users (MAUs) at the end of first
With the rapid adoption of smartphones and tablets, we expect the
demand for King Digital's mobile-based games to increase
exponentially. The company derives approximately 74.0% of revenues
from mobile platforms. The company's innovative product pipeline is
a key positive.
In April, King Digital launched
Diamond Digger Saga
). Most recently, the company launched Bubble Witch Saga 2, which
will further boost its top line in 2014. Moreover, gamers' growing
preference for free-to-play games bodes well for King Digital's
However, the strong sales of new consoles from Microsoft and Sony
are expected to intensify competition for King Digital in 2014.
Moreover, competition from Zynga and other established players with
a more visible business model like Electronic, Activision Blizzard
and Take-Two Interactive should not be ignored.
Currently, King Digital has a Zacks Rank #3 (Hold).
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