Analysts Weigh In On King Digital Entertainment PLC Following Strong 1Q Results, But Lackluster 2Q Guidance
Analysts are weighing in today on the mobile game giant King Digital Entertainment PLC (NYSE:KING), after the company reported strong first-quarter results, but provided lackluster second-quarter guidance, sending shares into a tailspin.
Mark Mahaney of RBC Capital rates stocks in the technology sector and is one of the top 15 analysts rated on TipRanks. Mahaney maintained a Sector Perform rating on shares of King Digital Entertainment with a price target of $17.00, which implies an upside of nearly 12% from current levels. The analyst noted, “On last quarter’s call, management said they expected 2015 seasonality to be similar to 2014, though the implied Q/Q decline this year is much greater than last year’s. This coupled with the overall softness in the mid-year makes us incrementally cautious. For us to become constructive on the stock, we would need to see stable trends showing bookings growth AND diversification away from CC – which likely isn’t attainable until 2016. We continue to view KING as a leading Casual Gaming company which is differentiated in that it has a Mobile-oriented, freemium-model, highly profitable platform.”
Wedbush analyst Michael Pachter sounds more optimistic about King Digital Entertainment’s long-term potential, stating, “Notwithstanding the market reaction, we believe King is on the right path.” He explained, “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, the analyst reduced the price target to $21 (from $23), while reiterating an Outperform rating on the stock.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Pachter has a total average return of 0.4% and a 46.3% success rate. Pachter has a -3.8% average return when recommending KING, and is ranked #2148 out of 3602 analysts.