Todor Pichurov

What's Next for King Digital Entertainment PLC (NYSE:KING)?

by Todor Pichurov August 1, 2014

King Digital Entertainment PLC (NYSE:KING, KING message board) stock finally caught a bit of a break. On Monday the share price managed to bounce off its 50-day moving average and looks like it might just stabilize. The last big pop for KING came in late June when optimistic analysts sent the price flying.

July proved to be a turbulent month for the UK-based game maker and publisher. After logging its all-time high, KING slipped and went well under its IPO price once again, despite the boost it received from analysis in late June. Whether King will test new highs is difficult to tell, as there are several factors that could potentially hinder it.

There is one factor that has the potential to hurt not just King but just about every top game developer on the Google Play app store. The European Commission passed guidelines that will force Google to list freemium apps (or such that have in-app purchases) anywhere but in the free category. This change is grounded in a desire to protect consumers but it should also be noted that parents can simply set up their family devices to require a password for every single purchase.

As a result, all European customers will see a very different list of free Google Play apps listing starting September 2014. All of KING's games should disappear from that list as they are all using the freemium, in-app purchase model. This can easily translate into far smaller exposure to new customers and negatively impact the company's revenue streams.

Additionally, KING still needs to prove it can make a big hit that is not Candy Crush Saga or its Soda version. The company's obviously in no rush to make a new killer game and is comfortable with squeezing its candy-smashing hit as long as possible. Yesterday KING announced teaming up with Spun Candy, a London-based confectionery company, to jointly produce a line of candies styled after the digital sweets in the game.

Yesterday KING closed 0.8% up, at $19.45 per share. The company's IPO price was $22.50.

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