Glu Mobile Inc. Rebounds, 2020 Outlook Looks Bright

Glu Mobile Inc. Rebounds, 2020 Outlook Looks BrightGlu Mobile Inc. Even More Attractive During Self-Isolation

Mobile video game provider Glu Mobile Inc. (NASDAQ:GLUU) has recently seen its share price rebound significantly. The stock is up about 50% since mid-March.

GLUU stock is being juiced by investor optimism over the impact that bored, coronavirus-quarantined consumers will have on mobile game stocks like Glu Mobile stock.

Case in point: on March 19, California Governor Gavin Newsom ordered the state’s nearly 40 million residents to stay at home to prevent the spread of the novel coronavirus (COVID-19).

The next day, New York Governor Andrew Cuomo announced that he would sign an executive order mandating that 100% of New York’s non-essential businesses close down.

Combined, these two states account for more than 18% of the country’s population.

No one knows how long the deadly coronavirus will last or how long people will need to self-isolate. Those people who are stuck at home need something to do. and mobile video games can be a great distraction.

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GLUU stock started the year slow but turned bullish in early February after the company announced strong fourth-quarter and year-end results, as well as an encouraging outlook. By February 6, the company’s share price had soared 35% year-to-date.

Those results even helped Glu Mobile stock buck the coronavirus-fueled stock market sell-off that started in late February. GLUU shares ended the month up 14% year-to-date. By comparison, the S&P 500 closed out February with a year-to-date loss of 8.9%.

GLUU Stock Overview

San Francisco-based Glu Mobile is a leading developer of “freemium” mobile games. This means you can play their games for free, but you need to pay for different add-ons. These micro-transactions have become a popular, lucrative revenue stream for the video game industry.

Mobile gaming is expected to be the fastest-growing segment of the gaming industry. In 2012, the mobile gaming industry generated $12.7 billion. By 2021, it is expected to hit $106.3 billion. (Source: “Raymond James 2019 Technology Investors Conference,” Glu Mobile Inc., December 9, 2019.)

That represents a nine-year increase of 737%, and a compound annual growth rate (CAGR) of 26.6%.

Glu Mobile’s diverse portfolio of time-zapping games include Cooking DASH, Deer Hunter, MLB Tap Sports Baseball, and Kim Kardashian: Hollywood. It also always has a number of new games in development. (Source: “Glu Reports Fourth Quarter and Full Year 2019 Financial Results,” Glu Mobile Inc., February 5, 2019.)

Glu Mobile Stock Information

Market Cap $1.1 Billion
52-Week Change -45.2%
52-Week High $11.75
52-Week Low $3.98
Shares Outstanding 150.0 Million
Float 126.6 Million
50-Day Moving Average $6.65
200-Day Moving Average $5.95

(Source: “Glu Mobile Inc. (GLUU),” Yahoo! Finance, last accessed March 24, 2020.)

Q4 Revenue Up 12%, Net Income Set Record

On February 5, Glu Mobile announced that its revenue for the fourth quarter ended December 31, 2019 increased 18% year-over-year to $112.9 million, while fourth-quarter bookings grew 10% to $108.4 million. (Source: Glu Mobile Inc., February 5, 2019, op. cit.)

During the quarter, Glu Mobile reported record bookings from Design Home and Covet Fashion. It also reported the highest fourth-quarter bookings in the Tap Sports Baseball franchise’s history.

Glu Mobile Inc. also reported record profitability of $10.8 million, or $0.07 per share. That’s a marked improvement from the fourth-quarter 2018 net loss of $1.3 million, or a loss of $0.01 per share.

CEO Nick Earl said the following about the results:

We hit a major company milestone with record adjusted EBITDA and record GAAP profitability for the full year. Additionally, 2019 marked our highest ever bookings year and the third straight year of double-digit year-over-year growth reflecting the continued strength and sustainability of our Growth Games strategy.

COO and CFO Eric R. Ludwig added, “We believe 2020 will be a transformational year as we expect to expand our core portfolio, stack additional bookings from our new title launches and focus on our two strategic growth priorities of cross-platform and acquisitions.”

Analyst Take

Glu Mobile Inc. was already an excellent mobile gaming stock leading up to the coronavirus outbreak.

Before the coronavirus was declared a pandemic, the company entered 2020 with momentum, with management saying it was going to be a “transformational year.” By all accounts, it appears that 2020 is shaping up to be an even stronger year than Glu Mobile could have imagined.