Is The 'Candy Crush' Maker Still King? Analysts Weigh In

King Digital Entertainment PLC KING beat Q1 earnings estimates Thursday, however, the stock tumbled more than 9 percent on weak guidance.

By Friday morning, shares traded at $14.45, down 3.60 percent.

The Street commented on the company following the news. Below are highlights from three analysts along with current ratings and price targets.

Wedbush - Outperform, $21 price target

“Notwithstanding the market reaction, we believe King is on the right path. The company’s entry into non-casual genres involves more complicated game development than it has dealt with in the past, and we believe that the gap in its release schedule is a symptom of a deliberate approach to these new genres. We expect “all other” game bookings to fully offset continuing declines in the core business beginning in Q3, and we anticipate a return to growth in Q4 and beyond.

“With that said, we are lowering our estimates for FY:15 and are initiating our estimates for FY:16 that suggest modulating bookings and only modest earnings growth. We are lowering our FY:15 bookings estimate to $2.24 billion from $2.43 billion and our EPS estimate to $1.90 from $2.30. We are initiating a FY:16 bookings estimate of $2.44 billion and an EPS estimate of $2.10.”

Bank of America - Neutral, $17 price target

“1Q results were better than expected with bookings of $604mn vs. our $592mn and adj. revs of $570mn vs the street at $554mn driven by Soda Saga growth q/q in the seasonally strong 1Q. Metrics were also better with 158mn DAUs vs. our 153mn and 8.5mn MUP vs. our 8.4mn and up from 8.3mn in 4Q. Growing payers q/q is a nice positive and expanding to new genres (mid-core, resource management) could accelerate this trend in 2H15. EBITDA was $248mn vs. the street at $229mn and we are encouraged by the cost leverage in the model. Stability or bookings growth will depend on success in new non-casual genres, which is difficult to forecast.”

“We are slightly more constructive on the stock given that negative summer seasonality is now better signaled to the street and there is less risk to estimates. However, we remain Neutral as new genre expansion is difficult to execute and we still see risk that Candy Crush (down 13% q/q) declines faster than new titles ramp.”

Barclays - Equal Weight, $19 price target

“[We] expect to see lower margins throughout the year. FX is partly to blame, but more than that, a change in the VAT will provide an additional headwind. Also, we expect KING will invest more in R&D and marketing to support a growing pipeline of games. We are modeling 2015 EBITDA margins of 39% – down about 275 bps y/y – a margin still well in excess of most public comparables [...] We are modestly lowering our 2015 booking estimate by 1% (or ~$25M), only to reflect incremental FX headwinds. We are also lowering our ’15 EBITDA estimate, though to a lesser degree, due to natural hedges in opex.”