Company name: Glu Mobile
Entry Price: $7.50
Target Price: $10
Projected Yield: 33.30%
Time Line: 3 to 6 months
About Glu Mobile
Glu Mobile is a large mobile game and app developer based in the UK. Glu Mobile's portfolio includes a collection of over 180 games across a variety of genres, including Fashion and Celebrity, Food, Sports and Action, Social Networking, and Design Home.
What's the Idea?
Capitalize on the stock that may rise due to being oversold and the improving business figures.
Buy Glu Mobile Shares >>
Why Trade Glu Mobile?
Reason 1: A relatively Low Share Price upon Weak Data
Following the Q2 earnings report, Glu Mobile stock fell more than by 20%, as the company fell short of market expectations. The earnings were expected at $165.30M, and the EPS, at $0.08; the actual figures came at $133.30M and $0.05, respectively. However, compared to the previous year, the Q2 earnings were 40% up, while the unrealized income increased by 78% to reach $182M.
In the coming months, unrealized earnings will be converted into actual ones. In addition, Glu Mobile found a way to invite more users. During the pandemic, the cost of installing apps dropped, which means a perfect time to invest in expanding the user base. As a result, Glu Mobile increased its ad spending by 50% compared to Q1, which led to a loss of $ 8.50M in Q2.
As such, weak data may only seem so at first sight. The company is currently trading at a discount to the industry level, with a projected price/earnings ratio of 17x, which could be an attractive entry level.
Reason 2: Improving Core Figures
During the pandemic, Glu Mobile has improved its core figures, mainly due to an increase in advertising costs and interest in gaming content. The number of daily and monthly active users increased by 26% and 13%, respectively, compared to Q1 2020, while the average earnings per user increased from $0.38 to $0.53, which is good compared to Zynga, Glu's competition, who has it at only at $0.248. Meanwhile, unrealized income increased by 78%. Glu Mobile demonstrates good dynamics, and in case this trend continues, the company's stock may recover soon.
Reason 3: Further Design Development and New Platforms
Another thing that may help the stock to increase in price is Design Home popularity. The unrealized revenue from this game is up 47.40% YoY, being at $62.30M in Q2 2020. At the same time, this is just one-third of the entire unrealized income of the company.
Glu Mobile is working to create infrastructure for porting the game to other platforms, in particular, to web browsers, as well as to introduce an e-commerce platform inside the game, which is currently being tested. If the result is successful, the project will be launched in the Q4 2020 in the US, and may then be also introduced in Europe moving forward. In case all goes well, Design Home may continue bringing good earnings for the next few years.
Reason 4: Confident Financial Position and Funds for M&A
Despite the weak results compared to the market expectations, Glu Mobile has a stable financial position. Not only are the earnings growing, but the company also has a stable positive free cash flow. The company has $283M in cash and has no debt.
This situation opens up opportunities for Glu Mobile to conduct mergers and acquisitions of game dev studios. This strategy can stimulate further long-term growth. Glu Mobile's management is positive about the company's outlook: the earnings forecast is now $538M to $548M, which means the figure might be 28% higher than the average result in 2019.
How to Use the Idea
- Buy Glu Mobile stock at $7.50.
- Allocate no more than 2% to 4% of your portfolio amount. To build a balanced portfolio, you can use our analysts' recommendations for USD or a EUR portfolios.
- Sell the stock when the price is at $10 per share.
How to Buy Glu Mobile Shares?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: In the Web Terminal section, type GLUU.US (Glu Mobile ticker in the NASDAQ) in the search box, and select Glu Mobile Inc. in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the dialog that will shop up, type GLUU.US (Glu Mobile ticker in the NASDAQ) and select Glu Mobile Inc. in the results. You will then see Glu Mobile stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
Buy Glu Mobile Stock to Use an Opportunity of an Oversold Company!
Buy Glu Mobile Shares >>
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