King Digital Entertainment’s (KING) growth prospects are looking pretty grim after the maker of "Candy Crush Saga" reported revenue that missed the mark.
Although second quarter revenues rose 30% year-over-year to $594 million, that still came up short of analysts’ estimates. The company also lowered its outlook for the year.
The weak revenue was due largely to a key metric in the mobile gaming world that showed a significant decline. King’s gross bookings - the amount users spend on virtual items - were down 5% from the previous quarter, reinforcing fears that Candy Crush may be losing its appeal.
King's newer games such as "Farm Heroes Saga" and "Bubble Witch 2 Saga" have also failed to replicate the success of Candy Crush, which still generates about 59% of the company's revenue.
King Digital Entertainment has been looking to expand overseas to attract new players. It teamed up with Chinese tech giant Tencent in April. Yahoo Finance Editor-in-Chief Aaron Task said, “The only silver lining here is that they do have a deal with Tencent to bring Candy Crush and other games to China.”
China is potentially a big growth opportunity for King. The number of people playing games on Tencent is bigger than the actual population of the United States, Task said. Tencent's WeChat is China's largest mobile app by users, with 438.2 million global monthly active users between April and June.
The company also bought Singapore-based game developer, Nonstop Games. The deal will help King enhance and develop more games for more platforms. The company is also hoping to keep investors hooked with a special $150 million dividend to shareholders. However, that was not enough to entice Wall Street. The stock is getting hit hard today, down more than 22% in early trading.
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- Consumer Discretionary
- Candy Crush