King Digital Entertainment PLC 3Q Earnings: What To Expect?

King Digital Entertainment PLC 3Q Earnings: What To Expect?
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King Digital Entertainment PLC (NYSE:KING) will post its third-quarter earnings after the market close on Thursday, and Wedbush analysts expect the Candy Crush Saga (CCS) and its non-Candy Crush games to beat  estimates. Wedbush analysts Michael Pachter, Nick McKay and Alicia Reese, in a report dated November 2, 2014 maintained an Outperform rating on King along with a price target of $21.

King to beat bookings consensus estimate

The Wedbush analysts expect revenue of $507 million, bookings of $525 million, and EPS of $0.50 while the consensus estimate for revenue and EPS is $495 million and $0.47 respectively. The guidance for bookings stood at of $500 – $525 million.

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In the last quarter, Candy Crush Saga bookings declined to $361 million from $430 million, while the bookings improved for King’s other games to $251 million from $212 million.

Pachter et al. believe the bookings guidance from the company was conservative, and note that the guidance includes $250 million for Candy Crush Saga and $250 – 275 million for the other games.

“We do not think that CCS declined by the $111 million implied by guidance (below Q2’s $69 million drop-off), as new game rollouts and the end of the World Cup and summer likely allowed CCS to stabilize,” note the analysts.

Overall, they expect the combined bookings to come in at $545 million including $270 million for Candy Crush Saga and $275 for the other games. On the basis of the data from AppAnnie, other strong performers are Farm Heroes Saga, Pet Rescue Saga and Bubble Witch Saga 2.

King may up its 4Q guidance

In the third quarter, King Digital Entertainment PLC (NYSE:KING) launched Pyramid Solitaire Saga mobile version in July, in August it launched Candy Crush Saga in China and the mobile version of Diamond Digger Saga in September. Analysts note that the company could “meet or exceed” the consensus EPS estimate even if the bookings come in at the low-end.

Analysts believe the impressive bookings in the third-quarter would help the management to give a full-year booking guidance of $2.25 – 2.35 billion. So, on the basis of this, the guidance for the fourth-quarter comes at $473 – 598 million, which is achievable given the expected launch of the Candy Crush Soda Saga on mobile in the fourth-quarter. Therefore, Pachter and team expect King to up the low-end of its fourth-quarter bookings guidance while the high-end guidance will be left unchanged.

King will report its earnings on November 6, and hold a conference call at 1:15pm PT.

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