Glu Mobile Inc. (NASDAQ:GLUU) is a great tech stock that we have been following for quite some time, and for good reason; it has been on a terrific run since late 2016. Since early May, however, the company’s share price has taken a beating.
Despite reporting solid first quarter results, investors punished Glu after it provided a soft outlook for the second quarter. Like most of the broader tech industry, GLUU stock took an additional hit on growing concerns about a tech trade war between the U.S. and China.
Glu Mobile’s share price is currently trading at $7.20 a share, erasing all of its 2019 gains. In fact, the company’s share price is down approximately nine percent year-to-date.
While some investors may have given up on the mobile video game developer, there are a number of compelling reasons to believe it will rebound in the very near term
GLUU stock is approaching a well-tested $7.00 support level. Should it break below that, the next support level is at $6.50. Glu Mobile’s share price has tumbled 35% since the start of May, and while technical indicators are not gospel, investors may view the $7.00 level as a bargain.
Glu Mobile Inc. Overview
San Francisco-based Glu Mobile is a leading developer of popular free-to-play mobile games. The company makes money when players spend money to increase their gaming experience. And a lot of people are happy to part with their money to ramp up the glam in Kim Kardashian Hollywood.
Some of Glu Mobile’s other award-winning titles include Cooking DASH, MLB Tap Sports Baseball, Deer Hunter, Restaurant Dash with Gordon Ramsay, Covet Fashion, and Design Home. Some of their classic titles include Gun Bros 2, Eternity Warriors, and Contract Killer Sniper. Recently launched titles include WWE Universe and Diner DASH Adventures.
|GLUU Stock Information
|Market Cap||$1.07 Billion|
|Shares Outstanding||145.25 Million|
|50-Day Moving Average||$9.25|
|200-Day Moving Average||$9.20|
(Source: “Glu Mobile Inc. (GLUU),” Yahoo! Finance, last accessed June 7, 2019.)
Until the start of May, Glu Mobile’s share price had great momentum, rewarding short-term and buy-and-hold investors. That changed pretty quick though. Investors were not pleased with its second quarter guidance and the possibility of a tech trade war with China has spooked the markets. On top of that, Glu Mobile stock has probably taken a hit from profit taking.
It has tumbled through its 50-day and 200-day moving averages as it closes in on the aforementioned $7.00 support level. Should that hold, there is plenty of upside potential, with a resistance level at $9.25 and near $11.00.
Chart courtesy of StockCharts.com
Glu Mobile Has Strong Start to 2019
On May 6, Glu Mobile Inc. announced that revenue for the first quarter of 2019, ended March 31, increased 18% year-over-year to $95.9 million. Bookings in the first quarter advanced seven percent to $92.6 million. (Source: “Glu Reports First Quarter 2019 Results,” Glu Mobile Inc., May 6, 2019.)
The company reported first quarter net income of $0.7 million, or breakeven per share, compared with a loss of $7.2 million, or $0.05 per share, in the same prior-year period.
“Glu had a strong start to the year with solid bookings growth and EBITDA profitability led by our three Growth Games,” said Chief Executive Officer Nick Earl. “Looking ahead, we continue to bolster our pipeline with three original IP launches slated for 2020. The increase in our bookings guidance for 2019 reflects our confidence in our business.” (Source: Ibid.)
For the second quarter, the company expects to report bookings of $100.0 million and $102.0 million. For 2019, Glu Mobile expects to report bookings of $445.0 million to $455.0 million.
After outpacing the broader market over the first four months of 2019, Glu Mobile Inc has taken an unnecessarily drastic hit. Despite beating Wall Street expectations on bookings in the first quarter, GLUU stock tumbled more than 35% on weak second quarter projections. A trade war with China added to the misery.
That said, GLUU stock has plenty of room to run in 2019. It is approaching a tested support level is releasing a number of new games, all of which should help juice its revenue and earnings in the third and fourth quarters.