Startups to Buy #3 — King Digital Entertainment (KING)
Since going public in late March, King Digital Entertainment (KING) has been a horrible performer, with the stock off nearly 30% from its IPO price. Yet the company continues to grow nicely — and remains a dominant player in the fast-growing mobile gaming market.
Of course, the main driver is the wildly popular Candy Crush Saga game. But King has also been churning out other popular titles like Pet Rescue Saga, Farm Heroes Saga, Papa Pear Saga and Bubble Witch Saga. And Candy Crush Saga may be getting even more lasting power, as King recently struck a distribution deal with Tencent (TCEHY), which operates China’s most trafficked messaging service (WeChat).
As for King’s financials, they continue to be robust. In the latest quarter, revenues came to $606.7 million, up almost 200% for the same period a year ago. There company also posted a profit of $27.2 million.
Despite all this, Wall Street isn’t too interested in mobile gaming, which could make a GOOG acquisition attractive. In fact, the valuation would likely be fairly cheap. Consider the price-to-earnings ratio of King is only 8. But GOOG’s is a much heftier 28.