Glu Mobile Analysts Stay Neutral After Mobile Game Maker's Q1 Print

Mobile video game maker Glu Mobile Inc. GLUU reported a mixed first quarter Monday, leading Roth Capital Partners to recommend that investors take a "wait and see approach."

The Analysts

Roth Capital's Darren Aftahi maintained a Neutral rating on Glu Mobile with a price target lifted from $10 to $10.50.

Wedbush's Michael Pachter maintained a Neutral rating and $9 price target.

Roth: 'Wait-And-See'

Glu Mobile's earnings report was mixed, as first-quarter bookings of $92.6 million beat expectations of $89.2 million, Aftahi said in a Monday note.

On the other hand, bookings fell short of expectations of $95.9 million by around 3.5 percent, while bookings growth of 7 percent year-over-year implies a slowdown of 1,100 basis points from the fourth quarter, the analyst said. 

Glu Mobile highlighted negative impacts on cost per impressions on "Design Home", "Covet Fashion" and "Kim Kardashian Hollywood," he said. 

The company also discussed several games in its pipeline and said a WWE-themed game will launch at the end of May, Aftahi said. Other upcoming launches include "Diner Dash Adventure" in July and "Disney's Sorcerers Arena" in August.

Among the three games, the beta results from the wrestling game appear to have "climbed back into good favor" and could usher in stronger contributions to full-year bookings than what was originally expected, the analyst said. 

Glu Mobile lifted its full-year revenue guidance by around $6.4 million at the midpoint to a range of $445 to $455 million, but it is unclear how much of the lift is due to new games or current games, Aftahi said. 

While signs point to an "encouraging" wrestling game launch, investors should wait for further confirmation on whether new games can usher in meaningful revenue and long-term growth, according to Roth Capital. 

Wedbush Sees Issues With 2019 Guidance 

Glu Mobile guided its second-quarter bookings to be $100-$102 million, which is short of the $105 million that Wedbush had modeled, Pachter said in a Tuesday note.

Beyond the second quarter, Glu lifted its full-year booking guidance to $445-$455 million, which implies a "substantial uptick in performance" in the back half of the year, the analyst said. 

The problem with Glu Mobile's full-year guidance is the lack of near-term visibility on how new releases will perform, Pachter said. The upcoming "Disney Sorcerer's Arena" launch could see $100-$120 million in annualized bookings, but its success is "far from assured," he said. The analyst said he's skeptical about the WWE-themed game due to the large number of wrestling games already available for download.

While the "Diner Dash" game does have an "excellent brand history" and could attract lots of players, the company has tested this audience in the past with minimal success, according to Wedbush. 

Price Action

Glu Mobile shares were plunging more than 18 percent to $9.19 at the time of publication Tuesday. 

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