Seeking Alpha

Five downgrades arrive as King trades near $14 post-earnings

  • "Our Long Thesis was predicated on the belief that the company could demonstrate overall Bookings & Revenue growth WHILE demonstrating diversification ... Q1 offered evidence. But Q2 and the Q3 outlook do not," writes RBC's Mark Mahaney, downgrading King (KING -23%) to Sector Perform and echoing a common view.
  • Barclays, Deutsche, JPMorgan, and Piper have also downgraded King (Pac Crest must be smiling). JPMorgan's Doug Anmuth: "While ... softness was seen across King’s portfolio, we believe the shortfall versus our expectations is more in newer games such as Farm Heroes and Pet Rescue than in Candy Crush."
  • On the CC (transcript), CEO Riccardo Zacconi noted Candy Crush Saga and Farm Heroes Saga's bookings softened towards the end of Q2, and that non-Candy Crush titles didn't grow as fast as expected.
  • He added a mix shift away from a "higher-monetizing U.S. audience" took a toll. Meanwhile, COO Stephane Kurgan admitted competition from Kim Kardashian: Hollywood and other games are an issue. "We’ve seen a number of games emerging in the top-10 where there is clearly a demographic overlap with our business."
  • Discussing the Nonstop Games acquisition, Zacconi declares King has made "a strategic decision to broaden our portfolio beyond casual games." At the same time, King is also counting on Candy Crush Soda (due for a full launch in Q4) and the recently-launched Bubble Witch 2 Saga to boost growth.
  • Prior King earnings coverage
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Comments (4)
  • ConArtist
    , contributor
    Comments (272) | Send Message
     
    still fantastic for a trade.
    13 Aug 2014, 01:16 PM Reply Like
  • King Rat
    , contributor
    Comments (922) | Send Message
     
    If I were to analyze only the numbers, I would say the stock is getting hit unfairly.
    Then I remember CROX and RIMM from back in the day and wonder if the stock is getting hit hard enough.

     

    From a psychological perspective: King did not invent the addicted masochistic demographic, those who will torture themselves to get to the next level at the expense of everybody and everything around them, and even be willing to pay for the privilege. No, King did not invent that group, but it does not excuse King from preying on that group. The only difference between these "games" and "gaming" as in a casino is that casinos offer good food, entertainment, and a chance at winning something. These games just bring out the losers in people.

     

    From an artistic perspective, I am shocked at how little creativity there is here. All of their games follow the same format and the names are similar. Only the graphics change. No I have never played one but I have seen commercials. All their games are mind-numbingly repetitive and "more work than work itself". If somebody got paid to play Candy Crush Saga they would probably quit after a week. If POWs were forced to play those games the Geneva Conventions would incriminate the POW's captors.
    13 Aug 2014, 01:25 PM Reply Like
  • EquityTrader1975
    , contributor
    Comments (395) | Send Message
     
    why did brokerage ipo for $20 a share, why are they not responsible for over inflating a stock ?
    13 Aug 2014, 02:08 PM Reply Like
  • PharmSterZzZ
    , contributor
    Comments (253) | Send Message
     
    KING will go under 5-6/share after 6 months. ZNGA lower their guidance and it's like a new stock. ZNGA is a good buy right now and hold for 1 year. I think it's a huge upside.

     

    KING & GLUU = short term
    ZNGA = LONG
    13 Aug 2014, 04:34 PM Reply Like
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