Deutsche Bank is one of five analysts to downgrade King Digital (NYSE: KING) Wednesday. The stock was cut from Buy to Hold and the price target reduced from $27 to $12.
“We downgrade our rating on King shares to Hold from Buy given a crushing disappointment of new games to hit our estimates and deteriorating monetization across the portfolio,” wrote analyst Lloyd Walmsley.
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Candy Crush beat Deutsche Bank’s estimates, but new titles significantly disappointed.
The report further laid out risks to King stock: “Concentration in CCS, intensely competitive with low barriers to entry, low number of paying gamers, low switching costs; shift in developers platforms may adversely affect user growth and limited long term visibility on success of future gaming titles.”
Risks to the upside include Asian growth and the possibility that another game becomes a blockbuster.
The $12 price target was derived with a combination of three times EV/Sales, seven times EV/EBITDA and 10 times PE. Shares of King Digital were last trading at $14.35, a 21.2 percent sell off.
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