Glu Mobile Inc.: Beaten-Down Tech Stock Set to Rebound Off Tested Support Level

Glu Mobile Inc. Excellent Tech Stock Ready to Bounce Off Support Level
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Glu Mobile Stock Poised to Make Huge Rebound

Glu Mobile Inc. (NASDAQ:GLUU) is a great tech stock that we have been following for quite some time, and for good reason: it has been on a terrific run since late 2016. Since early May, however, Glu Mobile stock has taken a beating.

Despite reporting solid first-quarter results, investors punished Glu Mobile after the company provided a soft outlook for the second quarter. Like most of the tech sector, GLUU stock took an additional hit due to growing concerns about a tech trade war between the United States and China.

Glu Mobile is currently trading at $7.20 a share, erasing all of its 2019 gains. In fact, the stock is down approximately nine percent year-to-date.

While some investors may have given up on the mobile video game developer, there are a number of compelling reasons to believe its stock price will rebound in the very near term.

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GLUU stock is approaching a well-tested $7.00 support level. If it breaks below that, the next support level is at $6.50. Glu Mobile’s share price has tumbled 35% since the start of May, and while technical indicators are not gospel, investors may view the $7.00 level as a bargain.

Glu Mobile Inc. Overview

San Francisco-based Glu Mobile is a leading developer of popular free-to-play mobile games. The company makes money when players spend money to increase their gaming experience. And a lot of people are happy to part with their money to ramp up the glam in Kim Kardashian Hollywood.

Some of Glu Mobile’s other award-winning titles are MLB Tap Sports Baseball, Deer Hunter, and Restaurant Dash with Gordon Ramsay.

Their classic titles include Gun Bros 2, Eternity Warriors, and Contract Killer Sniper. Their recently launched titles include WWE Universe and Diner DASH Adventures.

GLUU Stock Information
Market Cap $1.0 Billion
52-Week Change 30.7%
52-Week High $11.75
52-Week Low $5.08
Shares Outstanding 145.3 Million
Float 122.0 Million
50-Day Moving Average $9.25
200-Day Moving Average $9.20

(Source: “Glu Mobile Inc. (GLUU),” Yahoo! Finance, last accessed June 7, 2019.)

Until the start of May, Glu Mobile’s share price had great momentum, rewarding short-term and buy-and-hold investors.

That changed pretty quickly though. Investors were not pleased with the company’s second-quarter guidance and the aforementioned possibility of a tech trade war between the U.S. and China.

On top of that, Glu Mobile stock has probably taken a hit from profit taking. The stock has tumbled through its 50-day and 200-day moving averages as it closes in on the $7.00 support level. If that holds, there is plenty of upside potential, with a resistance level between $9.25 and $11.00.

Chart courtesy of StockCharts.com

Glu Mobile Inc. Has Strong Start to 2019

On May 6, Glu Mobile announced that its revenue for the first quarter of 2019 increased 18% year-over-year to $95.9 million. Bookings in the quarter advanced seven percent to $92.6 million. (Source: “Glu Reports First Quarter 2019 Results,” Glu Mobile Inc., May 6, 2019.)

The company reported first-quarter net income of $700,000 (breakeven per share), compared to a loss of $7.2 million ($0.05 per share) in the same prior-year period.

“Glu had a strong start to the year with solid bookings growth and [earnings before interest, taxes, depreciation, and amortization] profitability led by our three Growth Games,” said Chief Executive Officer Nick Earl.

“Looking ahead, we continue to bolster our pipeline with three original IP launches slated for 2020. The increase in our bookings guidance for 2019 reflects our confidence in our business.”

For the second quarter, Glu Mobile Inc. expects to report bookings of $100.0 to $102.0 million. For 2019, the company expects to report bookings of $445.0 million to $455.0 million.

Analyst Take

After outpacing the broader market over the first four months of 2019, Glu Mobile stock has taken an unnecessarily drastic hit. Despite beating Wall Street expectations on bookings in the first quarter, the stock tumbled more than 35% on weak second-quarter projections. Fears of a possible trade war with China added to the misery.

That said, GLUU stock has plenty of room to run in 2019. The stock is approaching a tested support level and the company is releasing a number of new games, which should help juice its earnings in the third and fourth quarters.