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Deutsche Bank adds to Angry Birds grief with shock valuation

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The company behind the Angry Birds game suffered its latest body blow on Monday, with analysts at Deutsche Bank telling clients the stock is probably worth only a third of its IPO value.

[HELSINKI] In less than half a year, one of the hottest initial public offerings in northern Europe has become a shareholder's nightmare.

The company behind the Angry Birds game suffered its latest body blow on Monday, with analysts at Deutsche Bank telling clients the stock is probably worth only a third of its IPO value.

Rovio Entertainment, which lost 50 per cent in a single-day selloff last month, has continued to sink in March. After dropping about 9 per cent on Friday, the shares fell roughly as much again after the market opened in Helsinki after the weekend. Deutsche says the stock is only really worth 3.70 euros a piece. It sold for 11.50 euros in September.

Chief executive officer Kati Levoranta, who led Rovio through the IPO, told investors last week that she's "not satisfied with the current performance." The "intention is to return to a higher growth path," she said.

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The main concern is that Rovio, which lost its games head a week after shocking the market with a profit warning, doesn't have much else besides Angry Birds to make money from. There are also questions as to whether management has figured out how to turn a profit on its business model.

So far, Rovio's efforts to broaden its games portfolio have largely faltered, with titles such as Jolly Jam never taking off. Licensing revenue has continued to plunge and Rovio is battling competitors who all need to spend growing amounts to get users to play their games and buy in-game merchandise and benefits.

Mathias Lundberg, an analyst at SEB in Stockholm, says Rovio isn't converting "enough players to payers." The company did well in the past two years, "but now seems to have hit the buffers," he said in a client note. SEB cut its price estimate by 9 per cent to 5 euros, and also slashed its target for earnings per share this year and next by more than 30 per cent.

Nizla Naizer, an analyst at Deutsche, says a "slower-than-expected games growth remains the key downside risk."

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