Glu Mobile (NASDAQ: GLUU) is making serious waves throughout the tech industry, despite a relatively cheap stock price – but is the company really worth your investment? Let’s take an inside look to find out.
The enterprise develops games for smartphones and tablets. The programs can be used on the following platforms: iOS, Android, Google Chrome, Amazon and Windows Phone. However, Glu Mobile is doing much more than making games. Since its 2001 founding, it has expanded to several other countries. Glu Mobile’s stock is currently trading around $3.20.
Glu Mobile is Approaching Its 52-Week High
Glue Mobile has a 52-week high of $3.21 and a 52-week low of $1.73. Though the stock was priced at slightly less than $14 back in 2007, it has hovered around the $2 mark for much of the past year. The stock is rapidly ascending to a new 52-week high thanks to its robust year-over-year revenue growth.
The company’s quarterly revenue has eclipsed the $68 million mark, spiking in response to the company’s Design Home product. Design Home is a popular new release created by mobile app developer Crowdstar, which Glu Mobile acquired last year. It was $45 million well-spent.
Design Home puts a home designer twist on the company’s hit Covet: Fashion dress-up game. The product performed so well that it offset the losses of numerous underperforming Glu Mobile games. In fact, Design Home is one of the 10 most downloaded apps for Android and iOS devices in the category of simulation games. Glu Mobile also provided good news on the bookings front. Bookings for the most recent quarter came in much higher than anticipated, jumping to $82 million.
Glu Mobile’s Weak Points
Take a close look at Glu Mobile’s recent income statement, and you will find every single important expense line item increased. The company’s net loss doubled to 17 cents per share, with quarterly bookings heavily weighted toward three games: Design Home, Tap Sports Baseball and Covet: Fashion. This is concerning for those who plan on holding Glu Mobile for the long haul.
The time will come when the public loses interest in these games. If the company’s brain trust can’t come up with more hit items, the bottom line will eventually take a major hit. One can only imagine how terrible Glu Mobile’s quarterly results would be had the company not shelled out $45 million for Crowdstar.
Glu Mobile’s Pivot
Company executives have altered their approach to games over the past couple of years. The emphasis is on bolstering the popularity of their most popular releases. Glu Mobile’s brass is focusing resources on the marketing and development of a handful of hit games rather than spreading out resources to myriad games. The company is also financing more live events to spark interest in its offerings.
Glu Mobile is now licensing intellectual property from the one and only MLB. This means the company’s games can use the names and likeness of every single Major League Baseball player and team. Though Glu Mobile’s Tap Sports Baseball got off to somewhat of a slow sales start this year, the alliance with MLB bodes well for the franchise’s long-term prospects.
This pivot appears to have worked quite well. Sequential bookings leveled out for the company’s Kim Kardashian: Hollywood for the first time following a series of decreases. The company’s Deer Hunter 2017 sequential bookings increased. The company projects upwards of $312 million in bookings for 2017. This is quite the jump from the $215 million bookings target announced earlier this year, meaning the company is loaded with cash for the foreseeable future.
Buy Sell or Hold?
Investors are advised to tread carefully when considering a position in any type of gaming stock. Gamers are notoriously fickle. They lose and gain interest in titles in surprisingly little time. A couple bad reviews combined with an ineffective marketing scheme can turn what seemed like a surefire hit into a massive flop. Yet, Glu Mobile operates in the incredibly hot mobile gaming industry.
Games for smartphones, tablets and other mobile devices are gaining in popularity as time progresses. New Zoo reports the mobile gaming market will expand from $40 billion to nearly $65 billion in 2020.
The question is whether Glu Mobile’s hit games will maintain their momentum long enough to bridge the gap to the next round of hits. If the momentum doesn’t continue or of the next group of hit games doesn’t arrive, Glu Mobile will be in trouble.
So, don’t scoop up thousands of shares of GLUU. If you own it, consider adding a small stake to your position or holding. If you do not own GLUU, consider a small stake in this rebounding mobile games company.
Regards,
Ethan Warrick
Editor
Wealth Authority
