Friday, April 25, 2014

Candy Crush Saga, (KING) investing in a dream world?

Actual screen shot taken from my iPod
Candy Crush Saga, Level: 1
King Digital Entertainment Plc (KING), the creator of the popular Candy Crush saga app, continues to amaze me. Recently they went public. It's truly incredible that this stock currently trades for $18.70, all because of a few popular apps like Candy Crush saga and Farm Heroes for instance. Play in a 'dream world', as stated on the official page of Candy Crush Saga. Investors seem to have high hopes, the stock even jumped another 5+ percent yesterday. The truth is that KING does have a large number of players, almost 100 million players each day on average - and that's just for the game Candy Crush Saga - though that's very impressive - you've got to wonder how long they'll be able to keep those numbers up. But what is so fascinating about this company and its games anyway? Somehow the market believes this stock price is 'fair', so they must have some incredible addicting app that sucks you in as soon as you load it up - even better, you just can't stop buying the upgrades! Stop making me buy the extra's! Just for the hell of it I decided to download 'KING's Candy Crush Saga' myself on my iPod, if something is this incredible, I definitely want to know what all the fuss is all about. After I downloaded the app I anxiously waited for the game to load up. It crashed (no joke). I took me about 4 tries (mind you, all the other apps on my iPod work perfectly), I cleared the memory, and even had to reset my iPod, soon I dubbed it KING's Candy Crash saga. After the iPod reset, the game finally loaded up. For those who are familiar with the 'Bejeweled' puzzle game, it's kind of similar. Except for the fact that you play on a huge map which contain the levels - like Super Mario World for Super Nintendo (yes I know my games!), but instead of a side scrolling game each dot is a 'Bejeweled' rip off world. Seriously? KING honestly is trading at almost $20 because they made a 'Bejeweled' rip off? The answer is yes, and how do they make their money you wonder? Well, they sell 'turns' (no joke, again). You only get a certain amount of turns, when you used up all your turns - you have to wait 20 minutes, then you can play again.. UNLESS... you guessed it right you BUY turns. I'm not making this up, I swear. This is why KING trades higher than Zynga (ZNGA), a much more established game company. Is the market learning from mistakes made in the past? Has the market gone mad?? This has got to be the biggest flop, and the most obvious 'soon to pop tech bubble' I've ever seen! How can KING's stock price be almost at $20, all based on a few games that do (supposedly) well at the moment. How are they able to sustain their company? Are they able to consistently produce games that are as popular as Candy Crush saga? The problem is that there's a very high chance that this is just a one hit wonder. They went public at the peak of their hay day. Impressive numbers, like the amount of average players each day, but it's going to be a very tough task to keep this level of performance up. On top of that they have to deal with an incredible amount of competition, not to mention that people may eventually get burned out by the games. This is a very high risk company to invest in. For me, it's the most obvious trade of the year. You guessed it right, I'm going short (betting against the stock). My target? Rather ask what my stop loss is, let me tell you now that I'll be amazed if this stock trades over $20 in the near future. The next earnings report for KING Digital Entertainment Plc is May 7th, I'm curious to see what their earnings are going to be. What is your opinion? Do you think this stock is going to tank as well, or do you see potential in King Digital?

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