King Q2 earnings compared to forecast

The consensus forecast for King's Q2 2015 EPS was 0.36. Based on the amount of Google searches for King's main titles by the end of Q2, I predicted an EPS of 0.45. Now, the actuals are out, and the real numbers are somewhere in the middle.

At a realised EPS for Q2 at 0.41, the surprise against the consensus forecast was 13.89%. My estimate had a negative surprise of -9%.

As for revenue, I forecasted Q2 revenue to be $517M. Actuals turned out to be lower by 5%, at $490M.

King Q2 2015 revenue forecast. Is the saga over for King?

Update 4 August 2015

The deterioration in search volume for King's main titles in Q2 2015 wasn't as bad as forecasted, thanks to an uptick in Candy Crush popularity in the last week. The consensus forecast for King's EPS for Q2 from Nasdaq puts EPS at $0.36. Based on the latest SVI data, I would expect King's revenue to be around $517 M. An EPS of $0.36 seems quite low. I would assume it to be close to $0.45.

The mobile game developer behind the Candy Crush Saga, King, had a record year in 2014, with revenue increasing 19% from the year before. But since then, things have changed. From the search volume for their top three titles, Candy Crush, Bubble Witch and Farm Heroes, we can see that none of the other titles have really taken off. What's worse, interest in their top title Candy Crush is going down.

What could this mean for revenues 2015? Revenue is already on a down trend. If we extrapolate out the search volume trend to the end of the year, the number of Google searches will have decreased by 43%.

The end of 2015 is of course half a year away, but if the trend continues, we should see a drop in King's revenue by 50% to $1105 M.

If we look a bit closer in time, ahead for Q2 2015, the same analysis puts revenue at $454 M. for the quarter. If we remove the first quarter 2013, that number goes up to $550, on par with the previous quarter.

The analysis is based on the assumption that Google searches equals general interest which translates into revenue. It's limited by the fact that Candy Crush accounts only for 50% of revenue, but is 95% of the search volume variation measure used here. A drop in new users wouldn't either translate into a direct drop in revenue, as existing users keep playing King's game.

The time of explosive growth looks to be over for King. If you have the analyst's revenue forecast for Q2, leave a note in the comments. How do you think the stock market will react to a continued revenue decline in Q2 2015?

Rovio revenue estimate 2014

Is there a correlation between Rovio's revenue and the amount of Google searches for their most popular title Angry Birds? Admittedly, we only have three data points to go on, but they do line up nicely. The upper chart plots the log change in search volume (x-axis) against revenue (y-axis). Based on that correlation, Rovio's revenue should decline somewhat in 2014, to 152 million €.

Supercell revenue 2014 is 1.55 billion €, compared to forecasted 1.7 billion €

How powerful is Google Trends for predicting revenue of Internet compaines? This is just one data point, but my previous prediction for Supercell's 2014 revenue was not far off.

Supercell's revenue for 2014 was 1.55 billion €, compared to my prediction of 1.7 billion €.



The next prediction I have my eye on is for the Apple Watch. Google Trends data suggests that the Apple Watch will sell well below what market analysts expect. While the launch of the Apple Watch did create some buzz on search engines, that quickly died out.

Another mobile games company from Finland is Rovio. If would be interesting to see if the correlation holds up for them as well. It's not looking good.

Supercell revenue estimate 2014

I've previously used Google Trends to estimate revenues, and I will give it another go here for the Finnish gaming company Supercell. I've gathered the combined search volume for Hay Day, Clash of Clans, and Boom Beach.

Based on the search volume, the new game Boom Beach has not yet exceeded the interest in Supercell's first game Hay Day, and is still a long way off from matching the success of Clash of Clans. The trend is however positive. The interest in Clash of Clans has continued increasing.

The total search volume for all three games has increase 330 % as compared to 2013. Based on the past correlation between revenue and search volume, I estimate Supercell's revenue to be 1.7 billions 2014.




The graph above plots the weekly search volume index summed by year against the official yearly revenue figures. The green dot represents the estimate for 2014.