Wedbush Cuts Price Target on King Digital Entertainment (KING) Following 6c EPS Beat
Wedbush reiterated an Outperform rating on King Digital Entertainment (NYSE: KING), and cut the price target to $18.00 (from $21.00), following 2Q15 results. Q2 bookings of $529 million were ahead of consensus expectations of $490.03M, and exceeded the high end of guidance. EPS of $0.49 beat the consensus figure by $0.06. Management expects Q3 bookings of $460 – 485 million, down 8% sequentially at the high end of the range.
Analyst Michael Pachter commented, "Q2 bookings of $529 million were ahead of our and consensus expectations, and exceeded the high end of guidance, while EPS of $0.49 beat the consensus figure by $0.06. Adjusted EBITDA was a solid $207 million, suggesting that annualized EBITDA is $828 million. At current prices, King shares trade at an EV/EBITDA multiple of roughly 4.5x."
Pachter also added, "King’s IPO reflected a growth story, with declines in Candy Crush bookings purportedly offset by growth in all other games; that was not the case in Q3, and it is unclear when the company expects a return to growth. We believe that the timing of new game launches and the choice of genres are the primary culprits responsible for the revenue decline. Investors are clearly impatient with the lack of growth, and we don’t blame them. The pace of new games has slowed in 2015, and visibility into the company’s lineup for 2016 and beyond is murky at best."
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Shares of King Digital Entertainment closed at $15.20 yesterday.