Glu Mobile (NASDAQ: GLUU) is a leading global developer and publisher of free-to-play mobile games. Glu is focused on developing compelling original and branded IP games on the App Store, Google Play, and Amazon Appstore. Founded in 2001, Glu is headquartered in San Francisco with U.S. offices in Burlingame and San Mateo, and international locations in Canada, India, Japan, and Russia.
On October 11th, the company announced the first details about the upcoming launch of The Swift Life, a novel digital entertainment project in partnership with multiple Grammy Award-winning artist, Taylor Swift.
The Swift Life is expected to provide a unique, all-inclusive and community-driven place for users, where Taylor and her fans can better connect with each other while expressing themselves in an interactive community/platform. The company is looking forward to its worldwide launch later this year.
Glu Mobile stated that The Swift Life would first be released in beta form for limited territories “soon,” followed by a much more significant worldwide launch later this year. Therefore, investors still have time yet before they can accurately measure its success.
The reason for this star engagement was also influenced by the considerable success of Glu’s June 2014 release Kim Kardashian: Hollywood. In fact, even after three years, it’s by far one of the company’s biggest titles and is likely to surpass the $200 million lifetime revenue milestone by the end of 2017.
From a similar perspective, a well-timed Taylor Swift mobile game, which will launch around the singer’s much-awaited sixth album “Reputation” on 10th November, is an extremely promising event for the company’s business profile. The ability to launch a co-branded game alongside what is likely to be one of the biggest album releases of the year is likely to generate millions of downloads.
Furthermore, “Benchmark” upgraded Glu Mobile from “Hold” to “Buy” with a price target of $6.00. Analyst Mike Hickey, cites a belief that the partnership with the Grammy-winning pop star could be a turnaround story for Glu. Also, per Benchmark, Bookings and profitability should exceed expectation & the company should approach positive EBITDA in Q4 and through the coming fiscal year.
Therefore, the upgrade is driven by Taylor Swift’s high social media reach along with the fact that Glu Mobile has “worked closely” to ensure the app lives up to her expectations.
Regarding financial performance, for the past two consecutive quarters, GAAP revenue has been up year on year and quarter on quarter as well for the company. The company will report its financial results for the third quarter ended September 30, 2017, after the U.S. markets close on Wednesday, November 1, 2017
The factors above, are driving Glu’s share price and the traders are incredibly bullish about the Taylor Swift game, which is scheduled to be launched in late 2017. In fact, notwithstanding the fact that shares have already doubled thus far in 2017, analysts have still revised their outlook on the company, and GLLU’ average price target estimates have been figured out at $6.
About the Company: Glu Mobile Inc develops, publishes and markets games designed to appeal to users of smartphones and tablet devices. Its gaming brands include Blood and Glory, Contract Killer, Deer Hunter, Eternity Warriors, Frontline Commando and Heroes of Destiny.
Glu Mobile Inc. is based out of San Francisco, CA and has some 754 employees. Its CEO is Nicholas Earl.
Product portfolio:
Other Recent Developments and Strategic Initiatives:
- Announced Partnership with WWE® to Develop a Mobile Game: In June 2017, Glu announced that it had entered into a multi-year agreement with WWE to develop a mobile game featuring WWE Superstars, logos and marks. The project will utilize the names and likenesses of many of the organization’s most popular legends including The Undertaker, Stone Cold Steve Austin, The Rock and Triple H, as well as a current roster of fan-favorites such as John Cena, Roman Reigns, and Brock Lesnar.
- Major Update and Expansion of Partnership with Gordon Ramsay: In May 2017, the company entered into a multi-year extension of its partnership with award-winning chef, Gordon Ramsay. In connection with this extension, Glu launched a major update to its mobile game featuring Chef Ramsay and rebranded the title Restaurant DASH with Gordon Ramsay.
Industry potential:
- Large and Growing Market Opportunity
- $64.9 Billion Mobile Gaming Market Expected by 2020
- 2016-2020 Global Games Market: Forecast per Segment Toward 2020
- Mobile is expected to be fastest growing segment of the gaming industry
- Total Market 6.2% Expected CAGR 2016-2020
Upcoming milestones/roadmap:
Second quarter financial results:
- Revenue grows 42% year over year to $68.7 million
- Bookings of $82.5 million exceed high end of guidance; increases 62% year over year
- Design Home peaks at #17 top grossing game on U.S. App Store for iPhone
- Liquidity: Cash and cash equivalents were $68.1 million as of June 30, 2017
Commentaries on second quarter performance:
The company had a better than expected quarter and a strong first half that reflects great execution on its strategy to position Glu for sustainable and profitable growth.
The significant quarterly bookings increase was driven by Design Home, which is emerging as a leading growth game for the company, as well as MLB Tap Sports Baseball 2017 and Covet Fashion. Furthermore, the company is also seeing improved performance trends in a number of other key evergreen titles.
The investments that the company made in user acquisition, particularly in Design Home, helped drive significant incremental downloads and positions it well to realize long-term favorable ROI.
The outperformance in the second quarter had a significant contribution margin flow through which drove improved bottom line results.
Guidance:
- Company’s third quarter and full year guidance reflect the strong quarter and management’s optimism and confidence in the current and upcoming portfolio.
- Company raises 2017 full year bookings guidance to a range of $307 million to $312 million.
Key risk factors and potential stock drivers:
The company’s near-term prospects are significantly dependent on its upcoming launch, and the key question is will the audience spend money?
Therefore, not just a successful launch, but proper commercialization of the Swift Life would be a key driver for the near to medium term.
Given its release date, The Taylor Swift App is unlikely to have much contribution on FY17’s financials, and it should generate upside opportunities in 2018, which –is still a contingency.
The company’ business risk profile is subject to the fierce competitive landscape. Therefore, GLUU’s ability to withstand competitive pressure and improve its operational profile would continue to remain a critical stock sensitivity factor.
Stock Chart:
- On Friday, October 20th, 2017, GLUU is trading at $4.47 on an above average volume of 3.68 million shares exchanging hands. Market capitalization is $602.60 million. The current RSI is 68.34
- In the past 52 weeks, shares of GLUU have traded as low as $1.73 and as high as $4.73
- At $4.47, shares of GLUU are trading above its 50-day moving average (MA) at $3.64 and above its 200-day MA at $2.72
- The present support and resistance levels for the stock are at $4.24 & $4.56 respectively.
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