Under Water Almost Since its IPO; is Now the Time to Buy GLUU stock?
Glu Mobile Inc. (NASDAQ:GLUU) went public on March 22, 2007 at $11.50 a share. Glu Mobil stock strolled higher that spring until one day in the middle of June, when a few trades printed at $14.80 per share. The unlucky investors who bought GLUU stock at that price have never seen it again. And, as of the end of August 2016, if they were unlucky enough to have held onto it, they would have lost more than 84% of their original GLUU stock investment (Source: “Glu Mobile, Inc. (GLUU),” Yahoo! Finance, last accessed September 5, 2016.)
Over the last five years, Glu Mobil stock has traded in a range between $2.00 and $7.00. Right now, it’s at the lower end of that range. So, is this a good time to own GLUU stock? And, if so, what can shareholders expect over the next several quarters?
To put Glu Mobile’s current situation into perspective, it is good to note that the company hasn’t reported positive earnings since the fourth quarter of 2014. They reported earnings for the second quarter of 2016 in early August. And, while Glu Mobile stock actually beat analysts’ expectations, the reality is that they still showed a loss of $0.06 a share. When the company issued that earnings release, it also noted that analysts and investors should expect to see a loss for the full year 2016. (Source: “Glu Reports Second Quarter 2016 Financial Results,” Business Wire, August 2, 2016.)
Are Financials Improving for GLUU Stock?
So, investors looking to evaluate Glu Mobile stock based on earnings need to know that its earnings per share (EPS) multiple will remain negative into the foreseeable future.
A peak at Glu Mobile’s financials offers a little solace. For the six months ended June 30, 2016, Glu Mobile burned through more than $22.0 million in cash (losing nearly $26.5 million in the period was a big contributor to that). But their balance sheet isn’t flashing big red warning signals. They have more than $158.0 million in cash and equivalents, and their quick ratio is a pretty healthy 2.8. So they could absorb several more quarters of losses without running into a liquidity crisis (Source: “Glu Mobile Inc (Filer) CIK: 0001366246,” U.S. Securities and Exchange Commission, August 9, 2016.)
Chart Courtesy of Stockcharts.com
The Bottom Line for Glu Mobile Stock
From a technical perspective, Glu Mobile stock is pretty liquid, with share volume averaging more than 1.8 million changing hands per day over the last quarter. Nevertheless, Glu Mobile stock is tied up in the hands of just a few institutional holders, which own more than 60% of GLUU stock. These folks tend to be less willing to accept losses than individual investors like you and me. So if they decide to bail, it could get ugly. And in the last reporting period, all but two of these big institutions were net sellers. (Source: “Financial Tear Sheet,” NASDAQ, 2016.)
The one bright spot related to Glu Mobile’s institutional ownership is that its single-largest shareholder, Tencent Holdings Ltd (HKG:0700), a huge Chinese media company, owns some 21% of Glu Mobile stock, and actually added to its position in 2016. So, if management can’t turn Glu Mobile around, maybe investors in GLUU stock could get bought out by Tencent.