Why King Digital Entertainment PLC Stock Popped Today

Is King Digital's jump meaningful? Or just another movement?

Jul 2, 2014 at 6:07PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Extending a two-day winning streak following two positive analyst notes, shares of King Digital Entertainment PLC (NYSE:KING) jumped another 10% early Wednesday before closing the day up around 6%.

So what: Shares of King Digital have risen around 27% since Monday, when at least two analysts chimed in with bullish comments for the mobile game specialist. First, JPMorgan's Doug Anmuth stated King Digital's strong free cash flow of around $800 million this fiscal year should enable it to return cash to shareholders. Anmuth also noted he believes King Digital's upcoming game launches should provide much-needed diversification. In addition, Wedbush analyst Michael Pachter expressed confidence in King Digital's "large market share" in the free-to-play games space, and insisted it's "built to last" given the impending contributions from other games in its pipeline.

Now what: Today's gains bring the stock almost exactly back to its March IPO price of $22.50 per share. Since then, the overwhelming worry for King Digital shareholders has been its over-reliance on the currently all-important Candy Crush Saga game, which single-handedly accounted for 67% of King Digital's bookings in the first quarter. Personally, I remain skeptical of the economics driving sustained profitability for businesses in the free-to-play game space. But if King Digital can merely prove it's not a one-hit wonder, I'll admit there could be little preventing the stock from rewarding patient shareholders from here.

Warren Buffett: This new technology is a "real threat"
Of course, that doesn't mean King Digital is the only promising tech stock out there. In fact, Warren Buffett recently admitted another emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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