According to Saxo Bank's Peter Garnry, time is of the essence for King. "King Digital is putting all its energy into finding the next game that can leave the company less reliant on cash-generator Candy Crush," said Garnry in a report. "Given what we have seen with other mobile games' trajectory in engagement, time is not King Digital's best friend."
Keep in mind that, during the last three months of 2013, Candy Crush accounted for roughly 80 percent of King's revenue. Though Candy Crush is a free download, King makes money off of in-game microtransactions. As such, investors are wary that King is simply relying on Candy Crush to ride the Wall Street wave, much like Zynga did with FarmVille back in 2011. Zynga suffered for it, shares have plunged by more than half since its initial public offering (IPO) back in 2011.
However, King CEO Ricardo Zacconi told CNBC that the company is focused on not having to solely rely on Candy Crush. "What we want to achieve is not to find another Candy Crush. That's not what we are here for," said Zacconi. "What we are here for is to build a portfolio of games. We want to build a network of players, of loyal players, who play out portfolio of games."
Also downplaying the lower-than-expected IPO is Rapid Ratings CEO James Gellert, who told Bloomberg that King is flexible enough to withstand the initial disappointment. "The market is focusing on whether Candy Crush can be replicated and the fact that they've had declining revenue over the past few quarters," said Gellert. "The company is really quite solid and is run in an efficient way that makes it well-positioned to be nimble."
At this point, it's to be determined whether King will avoid or suffer Zynga's similar fate.
(Image courtesy of Bloomberg)
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