Rovio shares tank after warning on profits

on Feb 22, 2018

Rovio shares sank Thursday, after the Finnish-based maker of Angry Birds announced future profits estimates well-below below analysts’ expectations. Increased marketing costs were amid the reasons behind the profit warning.

By 1240 BST, Rovio shares had lost almost half of their value, trading 46.71% lower at €5.30. The Rovio stock has been generally steady since the end of November 2017.

Upbeat Q4 results not enough for investors

Rovio’s fourth quarter results showed the games maker had a better final quarter of 2017, with revenues up 17%. That was above growth a year earlier and also a better performance than the disappointing third quarter.

Rovio also announced earnings before interest and tax of €10.4 million, up from €4.9 million in Q4 2016.

“The last quarter of 2017 was successful for Rovio,” the games maker said in its earnings release. “The key performance indicators of the company's top games improved significantly, group revenue grew by 17 percent and EBIT more than doubled from Q4 2016.”

Indeed, it’s performance over 2017 as a whole was also positive. Revenue grew 55% to €297.2 million in 2017 from a year earlier. Meanwhile, EBIT rose 85.8% to €31.4 million, over the same period.

Attention on outlook

However, investors were focused on the company’s outlook. And those details proved disappointing.

Rovio said it expects total revenue in 2018 to be between €260-300 million, while forecasting earnings growth of 9-11% – a similar result to the 10.6% gain made in 2017.

According to Thomson Reuters data, analysts had been expecting Rovio to advise sales of €336 million and profit growth of around the 14% mark.

“User acquisition investments are expected to be around 30 percent of Games revenues for the full year, however, the amount may vary depending on development of the games' monetization and the level of competition in the market,” Rovio said. “The cost per acquired user has risen significantly in the market.”