On track to benefit from mobile gaming, Glu Mobile (GLUU, Financial) still appears to be a good buy. Glu derives the majority of its revenue from Apple’s (AAPL, Financial) App Store, and the launch of new Apple devices should assist the company’s growth. In addition, Glu also has a very strong product pipeline. With the company's second-quarter earnings expected this week, it is a good time to take a look at what's expected of Glu Mobile and why investors should consider buying it.
The expectations
Glu is expected to deliver tremendous results for the second quarter. Its revenue is expected to rise 43% year over year. In addition, the company's loss is expected to come in at $0.04 a share, down one penny from the prior year period. Hence, Glu is making solid progress. In fact, investors can expect Glu to outperform once again in the second quarter after what transpired in the first quarter.
Glu is expected to beat the analysts’ estimates on both fronts due to the success of its recently launched game Kim Kardashian: Hollywood. Glu’s shares have soared the last two times that it beat the estimates, and the same is expected to happen again. Glu Mobile already has a diversified source of revenue and the success of its new title should allow it to easily surpass the estimates.
Positives ahead
Last month, Glu Mobile announced the acquisition of PlayFirst. The acquisition will bring about an expansion in its franchise, with games such as Diner Dash and Cooking Dash of the Dash series of PlayFirst already being downloaded more than 750 million times.
The month of March saw the release of Frontline Commando 2, the third installment of Glu’s popular Frontline Commando franchise. The earlier version of Frontline Commando was pretty successful and the same can be expected from this version as well.
Glu is using third-party publishing through Glu Publishing, which will expand its business overseas. For long-term growth, this will enhance the company’s market share. The company holds a strong place in the market in terms of monetization, ad revenue, and user acquisition. Although faced by a loss in the market for feature phones, the company has made up for it in smartphones and tablets.
A solid pipeline
The company also plans to join forces with EON Productions and MGM Interactive to create a mobile game based on the James Bond film franchise, which will be available for free. This could turn out to be a massive long-term growth driver for the company. The game is slated to launch in 2015, along with the launch of Deer Hunter 2015.
Leading games like Deer Hunter, Eternity Warriors, Robocop, Front Line Commando 2, Motocross Meltdown and 86 million installs of Deer Hunter 2014 have been crucial in contributing to the company’s success, achieving total downloads of 105.6 million across its entire portfolio.
The company’s strategic play of offering games for free and then charging for some special items has been helpful in attracting a broad audience. The acquisitions made by the company, the launch of a few more games, and its entry in the international market should help it prosper in the long run.
Benefiting from Apple
The bigger screens of the new Apple iPhone 6 and 6 Plus are expected to drive Apple’s sales higher. According to Morgan Stanley analyst Kate Huberty, Apple is expected to see a 20% surge in sales. Given that Apple is responsible for over 60% of Glu’s revenue, this launch could largely benefit it.
Takeaway
Glu Mobile’s last two earnings report were terrific; as a result, its share price surged overnight. The company is expected to deliver yet another blowout quarter following the success of its newest title, which is why I think Glu Mobile is a strong buy going into earnings.
