Is There Life After 'Candy Crush' for King Digital?

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King Digital Entertainment (KING) has tried to set itself apart from casual gaming rival Zynga (ZNGA) in its brief life as a publicly traded company. Unfortunately, it's failing to.

The company behind "Candy Crush Saga" posted disappointing quarterly results on Tuesday afternoon, sending the stock reeling on soft guidance and continuing fears that its flagship game has peaked in popularity. Gross bookings clocked in at $611.1 million. That may be 27 percent ahead of the prior year's take, but that's well short of the $641.1 million it scored during the first three months of this year. In fact, that's also lower than the $648 million in gross bookings that it generated when it peaked during the third quarter of last year and the $632 million it nabbed during the fourth quarter of last year.

This was always the fear when it came to investing in King Digital. Gamers are fickle, especially when it comes to free or nearly free apps.

Zynga investors got burned when they bought into the "FarmVille" and "Words With Friends" publisher's initial public offering in 2011 because gross bookings peaked a year later. King Digital could be even worse: It now seems like its performance peaked the year before it went public.

The Empty Piñata

There are plenty of problematic metrics in King Digital's second quarter report. Monthly unique users, daily active users and monthly unique payers all declined relative to this year's freshman quarter. However, the most glaring weakness is the fading popularity of the game that put King Digital on the map.

King Digital released "Candy Crush Saga" a little over two years ago, and the game proved to be instantly addictive for smartphone owners and folks playing apps on Facebook. However, it's been all downhill, since gross bookings for the game peaked in the third quarter of last year. After ringing up $493 million in gross bookings during the holiday quarter, we've seen King Digital score just $429.5 million in gross bookings during this year's first quarter and now $360.5 million during the second quarter.

The trend is probably only going to get worse. King Digital spooked investors by lowering its guidance for all of 2014. It now sees just $500 million to $525 million in gross bookings, its worst showing in more than a year and implying a fourth consecutive sequential slide in gross bookings for "Candy Crush Saga."

King Digital went public at $22.50 in March, but now it seems more like an exit strategy than it does an investing opportunity. Those who stayed away from the stock -- fearing that it would be Zynga revisited -- may have been on to something.

Zynga With Friends

Zynga's been the class clown of the IPO class of 2011, shedding more than two-thirds of its value since going public at $10 a share. Its quarterly report this month was a stinker, with gross bookings sliding and it, too, had to dial back its outlook.

The big difference between Zynga and King Digital is that Zynga wasn't as successful in 2012 when it peaked as King Digital is now. Zynga's guidance for gross bookings for this year is roughly a third of what King Digital is forecasting. However, worrywarts can spin that as a cautionary tale ending with King Digital having that much farther to fall.

There has never been a mobile game as financially lucrative as "Candy Crush Saga," but its time at the top peaked late last summer. King Digital has tried to diversify by pushing out new games that it markets to the dwindling base of "Candy Crush Saga" players, but clearly that strategy didn't work for Zynga when "FarmVille," "Mafia Wars" and "Draw Something" were hot.

King Digital also declared a one-time dividend on Tuesday afternoon, but the payout -- amounting to 46.9 cents a share -- is merely a diversion tactic. King Digital needs a new "Candy Crush Saga," and it needs it quick.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.