A Lot Of People Think The Candy Crush Company Is Hosed, But Analysts Are Rating The Stock A Buy

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King, the maker of hit mobile game Candy Crush Saga, just got an "outperform" rating by RBC Capital Markets.

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A lot of people have been hard on King. In fact, King had the worst IPO debut of the year at the time of its market debut, closing down 15.56%.

RBC Capital Markets initiated coverage with a price target of $24. King is currently trading at $18.64 on the New York Stock Exchange.

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Analysts at RBC Capital Markets are optimistic because King is actually one of the leading gaming platforms in mobile, with two of the top 5 grossing games across Apple, Google, and Facebook platforms. King's revenue combined with its revenue growth of 1,046% last year, King is the leader in the mobile gaming space, according to RBC Capital Markets.

Meanwhile, King is also showing good traction with its non-Candy Crush Saga games. That's good news for the company because one of the biggest concerns with King is that it won't be able to maintain growth without the success of Candy Crush Saga, which peaked in July 2013. The top non-Candy Crush revenue drivers have been Pet Rescue Saga and Farm Heroes Saga.

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There are, of course, still risks with King. It's concerning that the majority of its revenue comes from Candy Crush, which is on the decline. Another concern is King's reliance on platforms like iOS, Google Play, and Facebook, which take 30% commissions.

RBC Capital isn't the only firm to upgrade King. Barclays, Credit Suisse and Deutsche Bank also upgraded the stock.

Those are the firms that underwrote the IPO. Their enthusiasm for King might raise some eyebrows. Really, these firms are damning King with faint praise. King priced its IPO at $22 per share. Price targets on the stock are $23-$30, which means analysts aren't expecting much stock appreciation relative to the IPO pricing.

Here's King's 2013 revenues compared to gaming companies like Zynga, Gree, Supercell and Rovio. In 2013, King generated the second-highest revenues of all mobile gaming companies.

mobile gaming revenue 2013

RBC Capital Markets


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Here, you can see that King had the highest revenue growth rate in the mobile gaming space, growing 1,046% year-over-year.

Mobile gaming revenue growth 2013

RBC Capital Markets