One of last week’s hottest stocks is also one of this year’s top performers. Shares of Glu Mobile (NASDAQ: GLUU) rose 14% last week, and are now up 76% so far in 2018. The mobile gaming specialist kicked things off with a well-received presentation at the Stifel 2018 Cross Sector Insight Conference on Monday afternoon; then Piper Jaffray stepped in on Friday with a bullish initiation of the stock.
Piper Jaffray analyst Michael Olson started coverage of Glu Mobile with an overweight rating. He sees margins improving as the company relies less on risky new titles and costly licensed content. Olson is modeling double-digit percentage growth in bookings through at least next year, and he feels that its multiples will expand as the market warms up to Glu as a consistent producer in the lucrative realm of mobile games. His $7.50 price target on the stock is currently the highest among the six major analysts covering the company.
Sticking with Glu
Glu Mobile is trading at its highest level since the summer of 2015, and after a few flash-in-the-pan hits, it finally seems to have struck the right balance, with releases that keep gamers engaged while priming the pump for future releases. Bookings rose 25% in its latest quarter, and its three biggest contributors — interior decorator game Design Home, fashion design simulator Covet Fashion, and celebrity-making diversion Kim Kardashian: Hollywood — have all been around for more than a year.
Given the fickle nature of the mobile app business, a natural knee-jerk reaction might be concern that Glu is relying so heavily on mature releases, but it’s actually a good thing that these three franchises accounted for 66% of its bookings last quarter. They all came through with sequential growth in Q1, and Kim Kardashian: Hollywood — the oldest of the three releases given its 2014 debut — just delivered three quarters of sequential bookings growth.
These aren’t the only heavy hitters gaining momentum in the Glu Mobile lineup. MLB Tap Sports Baseball rolls out a new installment every spring as a Major League Baseball-licensed release, and it’s been growing in popularity with each one. Its latest release is an update to its Racing Rivals auto-racing franchise, so it has its fingers in several different gaming niches.
After Glu Mobile’s blowout Q1, it boosted its full-year guidance, something that it seems to be doing with every passing quarter these days. The stock has been a wealth creator for investors who bought in just as Design Home was taking off in late 2016. The shares have more than tripled — up 231% — since the start of 2017. Glu Mobile is a volatile stock, and it has burned investors before. However, the company finally seems to be putting all of the pieces together to become a hit factory in the booming mobile app market.
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