Glu Mobile Inc. (NASDAQ:GLUU) is a mobile app shop that’s been in a wide trading range between $2 and $6 for 5 years, but still seems to captivate traders as a story. We hope to provide some keys to demystifying that story a bit here.
Recent action is wrapped up in poor growth in earnings, deteriorating net income, disappointing return on equity and some signs of desperation such as GLUU’s bumbling move last week to shell out $500,000 for Poke Radar, a community-run app for the Pokemon Go game. But there is also a puncher’s chance for this stock, with some similar examples in the recent past. The question is all about how this San Francisco app shop handles its next move.
Glu Mobile Inc. (NASDAQ:GLUU) bills itself as a Company that develops, publishes, and markets a portfolio of games for the smartphones and tablet devices users. The company offers free-to-play action, celebrity, sports, and simulation genre mobile games.
It creates games based on its own brands, including Contract Killer, Cooking Dash, Deer Hunter, Diner Dash, Eternity Warriors, Frontline Commando, Gun Bros, Heroes of Destiny, Racing Rivals, Tap Sports Baseball, and Tap Sports Football.
The company also creates games based on third-party licensed brands, such as Kim Kardashian: Hollywood, Kendall and Kylie, Katy Perry Pop, James Bond: World of Espionage, Mission Impossible: Rogue Nation, and Sniper X With Jason Statham.
Glu Mobile Inc. markets, sells, and distributes its games primarily through direct-to-consumer digital storefronts worldwide.
The company was formerly known as Sorrent, Inc. and changed its name to Glu Mobile Inc. in May 2005. Glu Mobile Inc. was incorporated in 2001 and is headquartered in San Francisco, California.
Why would a company with such a great balance sheet be such a poorly performing stock?
It’s true: GLUU has basically no debt and tons of cash. But the story is a binary outcome situation, and will play out over the long-term. And there are two views on that.
The first one says: “Gaming is just not a high margin business. The barrier to entry is non-existent. People can knock up a killer game in their garage that catches fire. And publicly traded dev-houses never work out. Look at Zynga.”
And that makes sense. Games just keep getting cheaper and cheaper. Especially at the low end. In fact, if you Google “Free games”, you can play or download lots of interesting stuff.
However, there is another view that’s more consistent with addiction-theory. That view looks at Activision’s recent $5.9 Bln takeout of King Digital (makers of “Candy Crush”) and at Activision’s chart (NASDAQ:ATVI) itself, and its skyscraper trend, and sees something important. While gaming is a commodity with no premium pricing, addictive art is a goldmine.
We aren’t sure where to put GLUU at this point. But they need to do a whole lot more than spend a half-million bucks on a Nintendo pick and shovel stand or paying celebrities to put their names in titles. We need to see that addictive quality.
Currently trading at a market capitalization of $73.3M, GLUU has a significant war chest ($158.04M) of cash on the books, alongside total assets greater than $380M, which casts a big shadow over basically no total accumulated debt. That said, growth is absent, with the Company’s top line falling year over year by nearly 14%. Traders should note that nearly 17% of the float is held short at present. So, if we do start to see the right new project hit the market from this company, you can expect a “special” kind of pay-off. We’ll let you know if we see it. To get the full story on GLUU subscribe below to Oracle Dispatch right now.