Wedbush Previews King Digital: Expect A Beat, Guidance Appears Conservative

King Digital Entertainment PLC (NYSE: KING) will report its third-quarter results after market close on Thursday. Analyst consensus is calling for the company to earn $0.47 per share on adjusted revenue of $495 million. King Digital previously guided its bookings revenue to be $500 million to $525 million.

Michael Pachter of Wedbush previewed King Digital's third-quarter results in a note to clients on Monday. The analyst maintains an above Street estimate and expects the company to earn $0.50 per share on adjusted revenue of $507 million and bookings of $525 million.

"In the second quarter, Candy Crush Saga bookings declined quarter over quarter to $361 million from $430 million, while non-Candy Crush bookings grew to $251 million from $212 million," Pachter wrote. "We believe third quarter guidance assumes bookings contributions of $250 million from Candy Crush Saga and $250 to $275 million from its other games, both of which appear to be conservative."

The analyst does not believe that "Candy Crush Saga" revenue declined by the $111 million implied by the company's guidance, as the company likely benefited from a stabilization of new game rollouts and the end of the World Cup and summer.

Pachter notes that during the quarter, "Candy Crush Saga" was released in China and "Diamond Digger Saga" was released on mobile.

Bottom line, Pachter stated that even if the company reports revenue at the low end, management has "sufficient cost discipline" to meet or even beat consensus earnings per share estimates.

Shares are Outperform rated with a $21 price target.