Glu Mobile (GLUU) Fires on All Cylinders, but This Analyst Remains Sidelined

Mobile games giant Glu Mobile (NASDAQ:GLUU) has released the results for the second-quarter, showing strong improvements across the board. Investors are clearly pleased with the results, bidding up the stock 14% to $6.08.

For the three months ended June 30, revenues rose by 31% year-over-year from $68.7 million in 2017 to $90.2 million. Bookings enjoyed a smaller boost of 20%, up from $82.5 million to $99.4 million. But the “star of the show” was better than expected FY:18 guidance. GLUU increased its guidance for bookings to $374 – 378 million from $360 – 370 million, and for adjusted EBITDA to $36.0 – 38.0 million from $32.0 – 34.0 million, compared with prior consensus estimates of $357 million and $34 million, respectively.

Wedbush analyst Michael Pachter commented, “Although the success of Design Home thus far has been nothing short of remarkable, the potential for bookings erosion for the title remains. In addition, we do not expect the company to launch any of its new releases in 2018, meaning that investors will have to wait to assess whether Glu Mobile can deliver another growth title.”

“Our current model forecasts little or no contribution from the company’s planned WWE and Dash titles, both now expected to launch sometime in 2019. When we have more visibility into the launch dates and prospective contribution from each title, we will be in a better position to assess whether it is appropriate to value GLUU shares at a higher EV/EBITDA multiple,” the analyst added.

Net net, due to the company’s increasing reliance on its existing growth titles and an unclear release pipeline, Pachter reiterates a Neutral rating on GLUU stock, with a price target of $6.50, which implies an upside of 6% from current levels. (To watch Pachter’s track record, click here)

Most of the Street is far more confident than Pachter’s sidelined stance, with TipRanks analytics showcasing GLUU as a Strong Buy. Out of 5 analysts polled in the last 3 months, 4 are bullish on GLUU stock while 1 remains sidelined. With a return potential of 28%, the stock’s consensus target price stands at $6.85.

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