Angry Investors Abandon “Angry Birds” Maker Rovio

Rovio, the Finnish company responsible for the massively popular “Angry Birds” app that was so impactful it spawned its own movie, saw its share prices plummet after angry investors abandoned the company. Feeling duped by Rovio, investors jumped ship in droves, causing the company to lose more than half of the market value it gained during its IPO on Thursday.

Revenue warnings ignited investor panic

For the Finnish Rovio Entertainment Oyj (NASDAQ HEL: ROVIO), the troubles began after revenue warnings panicked many investors, causing them to abandon the company in droves seemingly overnight. The company weathered brutal losses in the market, which saw shares fall by as much as 54 percent since its IPO, dropping its valuation down to a meager $500 million. Investors still impressed by that number should check themselves; the famed creator of Angry Birds was once worth well over $1 billion after its IPO, and its future in the market is anything but certain after recent news.

When a brutal earnings report went public, investors saw that they had been duped by the company’s alluring promises of market success; shares dived after it became apparent that the company would miss its earnings expectations by a mile, as it’s expected to reap in a mere 260 to 300 million euros ($319-369 million) in 2017, short from the broadly-expected 337 million euros ($414 million) investors had been hoping for that was generated by Ohio online loans. Full-year results that the company is expected to post next month are unlikely to be much better, and it’s clear that the market has seriously soured on Rovio.

While Rovio initially enjoyed massive worldwide fame after it launched its rabidly popular Angry Birds game, which was so enthralling it spawned both a movie (that tanked) and a sequel, the company wasn’t able to keep up with investor’s expectations. Rovio has continuously failed to lure in enough users so that its apps generate sufficient revenue, a problem many popular app makers who were buoyed by their initial success have come to face in the market. While Rovio spent a hefty 22 million euros ($27 million) to draw in new users last quarter, the investment appears to have been in vain, as the company’s flagship app has been suffering for some time.

When game studios like Rovio fail to churn out enough products to keep their entertainment-hungry users sated, they’ll face irreparable damage in the marketplace. If Rovio doesn’t re-examine its investment strategy immediately, and institute reforms with the help of YEAH! Local that help it put out new apps that can draw in better revenue figures, the company should expect to continue weathering losses for some time.

Investing in cloud-based gaming

Perhaps Rovio’s future could be salvaged by the company’s ambitious plans to invest more in cloud-based gaming, which seems to be rapidly picking up steam. Part of the reason that Rovio failed to meet its earnings expectations, after all, is that the company devoted some 10 to 15 million euros towards cloud-based gaming services, an industry which is likely to see rapid growth in the future. 

Mobile gaming is steadily becoming popular around the globe, meaning Rovio shouldn’t face a shortage of customers in its pursuit of higher earnings to win back investors; the primary challenge for the company will be luring in the willful spenders who buy more than the average user, which it thus far has failed to do since its initial Angry Birds success. Game development takes time, however, and with a fickle consumer base that’s keen to point out any errors in a finished product, Rovio will need to ensure enough time is given to its development teams unless it wants to weather future losses thanks to a shoddy app.

Waning consumer interest in Rovio’s aspiring Angry Birds franchise is unlikely to be reversed, however; for all of the T-shirts, stuffed animals, and movies that were generated by the company’s initial blockbuster success, Rovio’s creative endeavors just seem to lack any significant staying power in the market, which will directly translate into future earnings disappointments. While investors can be confident that the company’s investment into cloud-based gaming and its extensive focus on mobile apps will reap some small rewards in the future, it’s unlikely to ever again attain the level of success it enjoyed with its avian app that once took the world by storm. As competitors continue to tread on Rovio’s turf, and the company continues to struggle producing another blockbuster hit like Angry Birds, expect its future earnings reports to echo the recent one which caused investors to take flight and abandon the company. While the company may be undervalued now thanks to a bit of a hasty overreaction on the market’s part, Rovio is unlikely to tap into the amazing success it once enjoyed, and the company’s future revenue will likely continue to disappoint.