Fitbit Inc (FIT) and Glu Mobile Inc. (GLUU) Are in Full-Throttle Rebound Mode

Fitbit Inc (NYSE:FIT) and Glu Mobile Inc. (NASDAQ:GLUU) are the real comeback kids this week, with both players showing solid steps forward after recent missteps that had tripped up investor confidence in the past. Oppenheimer offers a bullish take, dismissing any naysayers by simply pointing to guidance for the second quarter, proving everything for FIT is marching along in proper product launch fashion. Conversely, one of Wall Street’s top analysts gives credit where credit is due to Glu for quite a remarkable bookings performance and promising guidance. Yet, one¬†question still lingers: can Glu replicate its home run? Let’s take a closer look:

Fitbit: It’s a Good Start

Fitbit shares initially saw a 12% rise after the wearable fitness trackers maker released first quarter earnings for 2017. Oppenheimer analyst Andrew Uerkwitz notes that the FIT team appreciates this “as a favorable first step in the turnaround,” and even if one solid quarter does not erase the past- it certainly is a charged move in the right direction.

Therefore, the analyst reiterates an Outperform rating on shares of FIT with an $8 price target, which represents a just under 32% increase from where the stock is currently trading.

For the first quarter of 2017, FIT posted revenue of $299 million with non-GAAP EPS of ($0.15), outperforming the Street’s expectations for $279 million in revenue and ($0.18) in non-GAAP EPS. Gross margin came in below consensus at 40% and saw a year-over-year dip, yet the FIT team sees GM making a comeback through the rest of the year. Units saw a 38% year-over-year decline to 3.0 million shipments, but ASP of $96 marks a 13% sequential increase. However, “this number is likely distortedly-low as significant legacy channel inventory was cleared in the quarter,” explains the analyst.

What of those rumblings that new product launches fell off the path? Uerkwitz says to dismiss the false rumors, as these introductions are all “on track-hence reaffirmed guidance.” Meanwhile, direct sales have soared 3% year-over-year to capture 13% of total revenue, which the analyst attributes to rising demand abroad.

For the second quarter, FIT has guided revenue to $330 to $350 million and non-GAAP EPS to ($0.17) to ($0.14) while maintaining full-year guidance of $1.51 to $1.7 billion in revenue and ($0.44) to ($0.22) in non-GAAP EPS. Accordingly, the analyst has reigned in his expectations for non-GAAP EPS from ($0.24) to ($0.28) considering performance this past quarter and wariness surrounding operating expenses. However, 2018 projections have been left unchanged.

In the grand scheme, “Sell-through was better than it had anticipated and inventories continue to be drawn down. Management also reiterated both yearly guidance as well as indicating new products remain “on track”. We are encouraged by FIT’s progress in the three areas we’ve been most focused on for more than a year: simplification of product portfolio, focus on feature-rich devices, and have/execute on a clear digital health strategy. We acknowledge one quarter doesn’t make amends, but this is a good start,” concludes Uerkwitz, who believes that sometimes “no surprises is the surprise,” in the best way possible.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Andrew Uerkwitz is ranked #616 out of 4,561 analysts. Uerkwitz has a 57% success rate and earns 7.2% in his annual returns. However, when recommending FIT, Uerkwitz loses 27.5% in average profits on the stock.

TipRanks analytics show FIT as a Buy. Out of 5 analysts polled by TipRanks in the last 3 months, 3 are bullish on Fitbit stock while 2 remain sidelined. With a return potential of 36%, the stock’s consensus target price stands at $8.67.

Can Glu’s Growth Be Maintained Long-Term?

Top analyst Michael Graham at Canaccord is out with a middle-of-the-road vantage point surveying Glu following a “strong” first quarter showing with both bookings shattering expectation to the tune of $15 million and a stellar bookings guidance increase for the year- $65 million-worth of an upgrade to be exact. To the analyst, this guidance boost is a big deal, “signaling continued strength across games into Q2.” In reaction, the analyst has lifted bookings projections for both this year as well as the next while slightly raising EBITDA expectations.

So where is the bullish parade? Graham wavers, because though he finds the considerable bookings growth to be a positive indicator for Glu’s success, he still wants to see more proof that this upward momentum can keep roaring. Bookings did shoot up 28% year-over-year this quarter, but this follows a “flat” performance in the prior quarter.

Overall, “The growth was helped by stabilizing evergreen titles (Kim Kardashian, Cooking Dash, Gordon Ramsay), but driven mostly by Crowdstar built titles Covet Fashion and Design Home. In fact, DH had the strongest daily bookings of any GLUU title in 2016. This strength is expected to continue into Q2 and the rest of 2017 as the company is planning to meaningfully ramp user acquisition spend (to 28% of bookings in 2017, from ~18% in 2016). As such, implied EBITDA guidance is staying mostly unchanged despite the strong bookings guidance raise. We are encouraged by the bookings performance this quarter, but look for further evidence that the growth is more sustainable,” Graham surmises.

Michael Graham has a very good TipRanks score with a 61% success rate and a high ranking of #125 out of 4,561 analysts. Graham garners 12.2% in his yearly returns. However, when recommending GLUU, Graham faces a loss of 8.3% in average profits on the stock.

TipRanks analytics indicate GLUU as a Buy. Based on 5 analysts polled by TipRanks in the last 3 months, 2 rate a Buy on Glu stock and 3 maintain a Hold. The 12-month average price target stands at $3.00, marking a 25% upside from where the stock is currently trading.


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