Market sours on King Digital as Candy Crush sags

NEW YORK (AFP) - Shares of King Digital Entertainment plummeted to an all-time low on Wednesday as the British videogame developer's earnings suggested diminishing consumer taste for signature game Candy Crush Saga.

Near 1900 GMT, King Digital sank 23.1 per cent to US$13.99 following second-quarter results that Deutsche Bank described as a "crushing disappointment".

The share price hit its lowest level since the company launched its public offering in New York in March.

In its results on Tuesday, King said net income rose 31.3 per cent to US$165.4 million (S$206.5 million) compared with a year ago. But user results were tepid in some key areas compared to the prior quarter.

King's gross bookings rose 27 per cent from a year ago to US$611.1 million, but fell 5 per cent compared to the first quarter, primarily due to a weaker performance from Candy Crush.

The number of monthly active users rose 1 per cent from the first quarter, but daily active users dropped 3 per cent.

"Candy Crush declined more than we had expected," said King Digital chief executive Riccardo Zacconi, adding that other leading games such as Farm Heroes Saga and Pet Rescue Saga were not strong enough to make up for the loss.

Company executives blamed rising competition from new entrants, including the Kim Kardashian: Hollywood game, the reality-show star's offering in which users are invited to "create your own aspiring celebrity and rise to fame and fortune".

Zacconi said the Kardashian game has "risen very fast" and "clearly has a strong overlap with our demographic."

He also cited the popularity of the rising puzzle game 2048.

Some analysts have considered King Digital vulnerable because of the importance of the Candy Crush title to its results.

Deutsche Bank downgraded King to "hold," citing "deteriorating monetisation across the portfolio."

Bank of America Merrill Lynch rated the stock "neutral," saying King's outlook for new bookings was disappointing, but that profit margins were "strong".