King Digital ($KING) got hit hard when they last filed their earnings report. Kings profit continues to rise steadily, but operating expenses continue to rise. This in turn is causing their income to slowly rise. For tech investors, King has always been on their radar, but with the coming earnings report the question is: To buy or not to buy?
Candy Crush
It's no secret that Candy Crush Saga is Kings catalyst. According to Sensor Tower, Candy Crush Saga is worth of $617M, while the rest of their 13 products retain a total value of $816M. The value is there, but is the growth? 2014 was a strong year for King. Their revenue growth rate was 20%, with 2015 projected to bring in a sloppy 2% growth, according to X-Fin. The goal of King is to have the other 13 titles take the forefront when Candy Crush Saga inevitably fades. They have proven to both consumers, as well as investors that they are capable of producing high quality, successful mobile applications. King also purchases
Let's take a look at Candy Crush Saga's current numbers. In August 2015 alone, 2.1 million users downloaded this app and brought in revenues of $24M. This proves that model for revenue still rings strong. Candy Crush also maintains it's high quality reputation. It has over 177 thousand 5-star reviews.
Value
When looking at the value of King Digital, you will discover that all outlets are consistent with it being undervalued. Simply Wall Street, a research website, placed a 38% discount on King. At the current share price of $13.96, King is undervalued with a future cash flow prediction at $22.56. Therefore, the current share price is below the future cash flow value.
Future Growth
On August 5th, King Digital released a new game, Paradise Bay. This is a new market for King. They have always been focused on creating "match-three puzzle" games. Paradise Bay is a simulation game. Available for IOS and soon Android players, Paradise Bay takes users on a trip to the tropics, allowing them to create their own tropical paradise.
By March 2016, King will reach a share price of $22.
King has it in them, they just expanded their offices by 65,000 square feet, according to EveningStandard. They went for a prime location, SoHo. By expanding in London, this gives King even more leverage in the international market. As they expand their footprint in Europe, investors hope to see larger revenues.
Hold if owned, buy if not. King is going to have a strong finish in 2015.