If you have ever played the Candy Crush Saga game on your mobile device, you’d realize that the game, along with others like Flappy Birds, are merely a mobile phenomenon that could easily fade away over time once the addiction washes away, based on my stock analysis.
Yet for King Digital Entertainment plc (NYSE/KING), the maker of Candy Crush Saga, the company is clearly jumping with glee that it’s valued at more than $6.0 billion. The stock debuted with its initial public offering (IPO) on Wednesday priced at $22.50 per share, but it quickly fell to $19.17 after the open.
Make no mistake about it: my stock analysis is that King Digital is not worth $6.0 billion—or even half of that. The company generates about three-quarters of its revenues via the Candy Crush game. There are other games, but none have taken off to the degree Candy Crush has. While King Digital says it will look hard at developing another major game, there’s no guarantee that this will happen before interest in Candy Crush fades, based on my stock analysis.
What I suggest you do is look at more established developers of mobile games and applications that are much cheaper and not pumped up like King Digital, as my stock analysis suggests.
Based out of San Francisco, Glu Mobile Inc. (NASDAQ/GLUU) is an interesting small-cap gaming play that holds promise in the growing area of mobile gaming on smartphones and tablets, as my stock analysis indicates. Spending on mobile applications is estimated at around $56.0 billion by 2016, according to Forrester Research. With a market cap of $386 million, the company is valued much smaller than King Digital but it doesn’t have the big winning game so far, like King Digital’s Candy Crush, according to my stock analysis.
Glu Mobile produces games in-house and in conjunction with other companies, such as Activision Blizzard, Inc.; Atari, Inc.; Caesars Entertainment Corporation; and Twenty-First Century Fox, Inc. The company offers more than 40 games and is aggressively launching more. The games tend to be less the fad-type, like Candy Crush, and are sometimes licensed from existing games, such as Call of Duty, Guitar Hero, Family Feud, Family Guy, Lord of the Rings, The Price Is Right, Transformers, and the World Series of Poker to name a few.
Another alternative option to King Digital that also has excellent potential despite some superlative gains already is China-based Sky-mobi Limited (NASDAQ/MOBI) with a market cap of $274 million. First of all, there are more than 500 million Internet users in China and over half access the Web via their mobile devices. Given this, my stock analysis suggests that it’s not hard to imagine the vast market potential in China for Sky-mobi.
According to my stock analysis, Sky-mobi is one of the top mobile application stores in China, where the company pre-installs its “Maopao” mobile application store on handsets. Through Maopao, the user then has access to single-player games, mobile music, and books. The company currently works with lower-end smartphones but is developing apps for “Android”-powered phones. Sky-mobi has a venture with China Mobile Limited (NYSE/CHL) and its 600 million-plus users.
While both Glu Mobile and Sky-mobi are aggressive plays, they may be priced much better than King Digital, based on my stock analysis.