Shares in Rovio Entertainment, best known for creating the ‘Angry Birds’ franchise, have plummeted. The dive wiped more than a third off the company’s stock price, after reporting lower-than-expected profits for 2018.
The stock dropped nearly 40 percent during trading in Helsinki, marking the company’s worst share plunge since its initial public offering in September. The Finnish software developer said revenue would decline this year with adjusted profit expected to total up to only 11 percent of sales against 10.6 percent in 2017.
The Espoo-based firm expects sales of €260-300 million (US$320-370 million) compared to €297 million last year. The numbers are far below the analysts’ projection of a margin of 14.5 percent and sales of €336 million, according to Thomson Reuters’ data.
The outlook is “hugely disappointing,” according to a Malta-based FIMBank, as quoted by Bloomberg. Rovio blamed expanded marketing costs and other necessary investments for the lower profit outlook.
The company scored a success with the launch of the original ‘Angry Birds’ game in 2009, but in 2015 Rovio had to slash a third of its staff after a significant operating loss. The decline was triggered by an intense competition and global shift to games available for free.
Rovio’s shares were down 43 percent to €5.63 at 10:24 GMT. In November, its shares declined by nearly 20 percent after Rovio’s first interim report as a listed company.
“Competition in the mobile game industry is very tough and user acquisition has become more expensive for the companies,” Atte Riikola, analyst at Inderes Equity Research told Reuters.
User acquisition costs in the fourth quarter more than doubled, and were reportedly equal to 24 percent of the company’s games unit revenue. Income from plush toys and other use of its brand dropped over 50 percent and accounted for some 10 percent of total sales.
Fourth-quarter operating profit at Rovio doubled to €10.4 million on revenue up 17 percent to €73.9 million. The company will reveal its full interim results on March 2.