Glu Mobile Inc. GLUU has new game launches scheduled for 2021, which could accelerate bookings growth, and margins are likely to expand as its portfolio scales, according to Goldman Sachs.
The Glu Mobile Analyst: Michael Ng initiated coverage of Glu Mobile with a Buy rating and a 12-month target price of $9.80.
The Glu Mobile Thesis: The company’s Growth Games comprised 79% of total bookings in 2019 and are likely to grow by 16% in 2020, driven by stay-at-home measures, Ng said in the note.
He added, however, that engagement is likely to normalize over the next 12 months, resulting in a slight decline in Growth Games in 2021, before bookings return to low-single-digit growth in 2022.
Glu Mobile has several new games in its pipeline for a 2021 launch, including "Deer Hunter World: The Hunt," "Tap Sports Fishing" and "P3." Although the contribution from these could be negligible in 2021, the analyst said their bookings in 2022 are estimated at $90 million.
Meanwhile, the company is likely to “continue executing tuck-in M&A to grow its portfolio of games,” Ng wrote. Glu Mobile should achieve margin expansion as its portfolio scales and it can close the gap with Zynga Inc ZNGA “if it is able to achieve a similar level of scale for its mobile games."
GLUU Price Action: Shares of Glu Mobile were trading around $8.04 at the time of publication.
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