Not All Analysts Are Bullish On King Digital

Shares of mobile game maker King Digital Entertainment PLC KING jumped about 21 percent in trading on Thursday, February 12th after the company exceeded fourth quarter earnings expectations. Most notably, the company revealed a stronger-than-expected launch of the sequel to its popular “Candy Crush” game.

Highlights from King Digital’s Q4 report include adjusted earnings of $0.57 per share, beating analysts’ estimates by $0.10, but also marking an 11 percent decrease from the same quarter a year prior. The company posted adjusted revenue of $559.2 million, down from $601.4 million year-over year, but coming ahead of analysts’ consensus estimate of $519.93 million.

The company also announced a special dividend of $300 million, or $0.94 per share, to be paid to shareholders on March 24, marking the third straight quarter the company has returned cash to shareholders.

King Digital Entertainment believes the rapid download rate of the sequel to its mega hit Candy Crush Saga was able to reverse the decline in income from the original game. In addition, the company has said the success of the second Candy Crush game proves its ability to create popular games and extend the lifespan of its brands.

Chief Executive Riccardo Zacconi said of the company’s results, “The success of ‘Candy Crush Soda Saga’ outperformed our expectations, not only proving that we have a strong brand (in ‘Candy Crush’) but also proving the strength of our franchise model strategy.”

RBC Capital analyst Mark Mahaney weighed in on King Digital Entertainment on February 13 following the company’s Q4 results, reiterating a Sector Perform with a $20 price target. He noted, “What we would look for in order to become constructive is a demonstration of overall Bookings & Revenue growth WITH diversification away from the dominant Candy Crush franchise. This should be attainable, but probably not until 2016.”

Overall, Mark Mahaney has a 67 percent success rate recommending stocks and a +22.6 percent average return per recommendation.

Similarly on February 13, Stern Agee analyst Arvind Bhatia maintained a Neutral rating on King Digital Entertainment, noting “Investors should not be overly optimistic on the stock, even though it looks cheap on [the] surface.”

Arvin Bhatia currently has an overall success rate of 69 percent recommending stocks and a +33.1 percent average return per recommendation.

On the other hand, Wedbush analyst Michael Pachter has a different view on King Digital Entertainment, maintaining an Outperform rating on the stock on February 13. In regards to King Digital’s Candy Crush Saga, the analyst stated, “We think it is prudent to model only moderate success this year.”

Overall, Michael Pachter has a 43 percent success rate recommending stocks and a +0.3 percent average return per recommendation.

On average, the top analyst consensus for King Digital Entertainment on TipRanks is Hold.