King Digital Entertainment plc (KING) is set to hit the online gaming world with the new addition of its famous Candy Crush Soda Saga. The company announced the launch of Candy Crush Soda Saga on Apple Inc.’s (AAPL) iOS and Google’s (GOOG) Android mobile platforms. The game was initially launched on Facebook (FB) and received strong response, which propelled the recent launch.
The new game works on the premises of Candy Crush Saga with the addition of 135 levels and new game modes — Soda, Soda Bears, Frosting, Honey and Chocolate.
With this launch, the company will be able to lure new players and strengthen its long-term prospects, which had become a cause of concern for investors because of the company’s dependence on Candy Crush.
According to street reports, while the company faces stiff competition from established players like Zynga and Glu Mobile, it enjoys an edge over the smaller rivals because of its higher funds that can be used for promotional activities or investment in significant research & development (R&D) for introducing new games. Notably, the company recorded 283% year-over-year increase in R&D expenses in the third quarter, which resulted in significant contraction in net margin to 27.4% from 37%.
With the rapid adoption of smartphones and tablets, we expect the demand for King Digital’s mobile-based games to move upward, supporting its financials. The company derives over 70% of its revenues from mobile platforms. It runs nine studios and has launched four mobile games in 2014, three of which made it to the top 15 games in both Apple and Google app stores. However, the company’s current concern is to counter the ever-rising competition in the gaming market and position its new products as top revenue generators before demand for older games declines.
King Digital currently has a Zacks Rank #3 (Hold).
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