Wednesday, November 11, 2009

KongZhong Got It Goin' On

I've done a bunch of posts about Chinese mobile content kingpin KongZhong (KONG) in the past, so I'm not going to rehash what they do... but, generally you should know, I'm a big fan of this company, with the caveat that I've had lingering concerns that their success is unduly reliant on staying in the good graces of China Mobile. Based on their Q3 earnings conference call, earlier this evening, I feel confident that the company is keenly aware of this and that they're taking all the right moves to mitigate that situation. Currently, the fastest growing (246% y-o-y) sector of KongZhong's revenue mix (23.4% or $8.2mil in Q3) is coming from their catalog of 400 mobile games, which are distributed through multiple channels. Only 33% of their downloadable game revenue is billed through China Mobile, the rest comes equally from handset manufacturer and off-deck WAP channels (including their own portal). The company is forecasting revenues of between $37-$38mil for Q4 and they believe mobile games will continue to be the revenue driver. They also mentioned that they are beginning to see real revenues from freemium (try & buy) and virtual goods billing models for games. I think these guys are firing on all cylinders, and given that they are the smartest and strongest player with the most cash ($135mil) in one of the fastest growing mobile markets in the world, I think KongZhong has the potential (within the next 3 years) to be the biggest mobile entertainment company in the world. Someone owes me a drink when that happens.

1 comment:

  1. I've been a fan of KONG for some time. I bought in the $6's and also in the $3's. I sold most of my shares at $15.50. I think this stock will pull back to $10-$11 and will hover around there for a while. Long term good, but not great. I think they are a very solid take out candidate. In 5 years, the stock will still be below $25. I think at this point with the stock up 350%, there are much better opportunities out there. Good luck.