Are King Digital Earnings Enough?

King Digital Entertainment PLC (NYSE: KING) reported its second quarter financial results after the market closed on Thursday. This video game designer had $0.49 in earnings per share (EPS) on $489.5 million in revenue compared to consensus estimates from Thomson Reuters that call for $0.43 in EPS on $490.03 million in revenue. The same period from the previous year had $0.59 in EPS on $593.48 million in revenue.

Gross bookings totaled $529 million for the second quarter, representing a 12% sequential decrease of $75 million, and a year-over-year decrease of 13%.

In the second quarter, monthly active users (MAUs) totaled 501 million, down 49 million (9%) from first quarter, and up 16 million (3%) year over year. At the same time, daily active users (DAUs) were 142 million, down 16 million (10%) from first quarter, and up 4 million (3%) year over year.

Based on the game releases and recent trends, the company expects that its gross bookings will be in the range of $460 million to $485 million in the third quarter. There are consensus estimates of $0.42 in EPS and $489.05 in revenue for the third quarter as well.

Three King games were top 10 grossing games on both the Apple App Store and Google Play Store in the U.S. for second quarter 2015, marking the company’s sixth consecutive quarter with at least three titles in the top 10 grossing games list on one or both of these platforms.

During the second quarter of 2015, King Digital repurchased roughly 900,000 shares through open market purchases utilizing $15 million of the $150 million share repurchase authorization.

Riccardo Zacconi, CEO of King Digital, said:

Our second quarter 2015 gross bookings exceeded the high end of our guidance range and for the third consecutive quarter, Candy Crush Saga, Candy Crush Soda Saga and Farm Heroes Saga ranked within the top 10 grossing games in the Apple App Store and Google Play Store in the U.S.  These results reflect our execution on delivering new content and features in our franchise games and demonstrate the continued benefits from operating global mobile game franchises and the strength of their brands.  We are also pleased to have recently launched Paradise Bay, our first resource management game, and Scrubby Dubby Saga, our first game with a slider mechanic, and look forward to introducing these fresh games to our massive player base and to players around the globe.

At the end of the second quarter, cash and cash equivalents were $786 million, compared to $964 million at the end of December 2014.

Shares of the King Digital closed down 2.8% at $15.20 in its 52-week trading range of $10.68 to $18.00. Following the release of the earnings report, shares were down 6.9% at $14.15 in the after-hours trading session. The stock has a consensus analyst price target of $19.50.

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