This morning, analysts at Bank of America, Deutsche Bank, BMO Capital Markets, Pacific Crest, RBC Capital Markets, Barclays, Cowen and JPMorgan all initiated coverage of the company behind the popular Candy Crush game with a buy rating or equivalent. Analysts at Piper Jaffray and Sterne Agee came out with a neutral rating, according to the Analyst Ratings Network. Price targets range from $21 per share to $31 per share.
$KING wtf, 10 banks upgrated this morning to strong buy PT 21-30$..!!!-- grigorios papaioannou (@gregpap) May. 5 at 04:47 AM
The stock opened nearly 2% higher Monday and kept climbing. The bullish consensus was a real coup for early King investors, who have watched the stock tumble as much as 25% below its March IPO price of $22.50 per share. The stock now trades around $17.56.
When King debuted on the NYSE, investors said bankers did King a disservice by slapping such a high price on shares. The $7 billion valuation implied by King's IPO price would have made the company -- known for one hit game, Candy Crush Saga --worth just 20% less than gaming giant EA (EA - Get Report).
But King's haircut has made the stock more attractive. It has a $5.53 billion market cap and trades at 10.2 times trailing 12-month earnings. King sentiment is 60% bullish, according to StockTwits' analytics.
King will report its first-quarter results on Wednesday, May 7, before the open. Analysts said that, although Candy Crush may have peaked, the company still makes a ton of money off of the game, which is free to start and charges for extra lives. Another King game, Farm Heroes Saga, is also gaining traction.
$KING Stop this "One trick pony" sentiment. Candy Crush has plenty of room to run. Next 2 qtrs are guaranteed. Money, money...and more money-- Michael B (@Mbrillo1) May. 5 at 10:05 AM
Perhaps more importantly for mobile gaming investors, analysts predict strong growth for the sector. Merrill Lynch projects that the mobile gaming sector will grow 35% a year.
If King's Wednesday earnings seem on track to prove analysts right, then shares of other mobile gaming companies such as Glu Mobile (GLUU - Get Report), Zynga (ZNGA - Get Report) and NQ Mobile (NQ) will see a lift, say StockTwits investors.
Zynga shares edged higher this morning. However, shares of Glu Mobile, the company behind the popular game Frontline Commando, fell about 1% by 10 a.m. Monday morning. Shares jumped 8% after it reported earnings on April 30, giving it a forward price-to-earnings ratio of 28 times -- less than the sector will grow as a whole, if Merrill's predictions prove correct.
NQ Mobile also fell into the red. Investors still reacted to last week's news that the company had requested an extension to release an independent audit of their financials. Management has promised the audit will prove that a prominent short-seller's fraud claims are baseless.
NQ's specific issues aside, sector bears on StockTwits said there was good reason for NQ Mobile, GLU Mobile and others to be down, despite King's good news. Mobile gaming, they argued, is an over-hyped fad that even analysts have bought into. Growth projections will soon turn out to be little more than fantasies, they say.
$KING Candy Crush is just a fad, not worth investing in these junk companies.-- Taco Trader (@JD_trade_4_fun) May. 5 at 10:02 AM
But most investors on StockTwits.com said Monday that the bears are missing out. The King is doling out candy. And they're ready to take it.
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At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.