Can Glu Mobile Inc. (NASDAQ:GLUU) New CEO Turn It Around?

Glu Mobile Inc. (NASDAQ:GLUU)

Glu Mobile, Inc. (NASDAQ:GLUU) shares are bucking the recent broad market downtrend. Over the past four days, GLUU shares have gained over 10% from their inter-day low of $2.01. Today shares opened at $2.10 and are trading around $2.20 on volumes that are over twice their daily average. The San Francisco, CA-based firm had its shares trading just short of $7 in 2015 before a slide down to $2 – a level which seems to be providing support for the last year. In November, a new CEO was brought in to turn its fortunes around.

Glu Mobile, Inc. (NASDAQ:GLUU) is a developer and publisher of games for smartphones and tablets. Glu covers five genres: social networking, food, home, sports, fashion, and action. Some of its games are brands developed by the company such as Contract Killer, while other games are celebrity focused such as Gordon Ramsey’s DASH. Sales are generated through digital storefronts that provide direct-to-consumer channels.

In November of 2016, Nick Earl was named as the new CEO succeeding Niccolo de Masi. The motivation for the change was apparent – the sector is booming yet sales grew from $223.1 million in 2014 to just $249.9 million in 2015, then dropped to $200.6 million in 2016.

Thomas’ new direction was to jettison the celebrity branded games which sucked royalty revenue from the firm (Taylor Swift being the lone survivor), and re-focus the team on developing new games. Games made with such celebrity names as Katy Perry, Britney Spears, and Nicki Minaj all, essentially, failed. So Thomas is betting on the creativity of Glu Mobile, Inc. (NASDAQ:GLUU) employees to return the company’s stock to its upwards trajectory. To help achieve this Thomas brought in a big hitter – Mike Olsen. Olsen had been running the Electronic Arts team that developed Star Wars : Galaxy of Heroes – EA’s #1 grossing game.

However, competition in the $40 billion mobile gaming space is fierce. And developing games that attract a wide number of users can cost a lot of money – creative talent has often been the black hole through which funds disappear, never to return.

However Glu Mobile, Inc. (NASDAQ:GLUU) released its Q4 2016 and full year earnings results to relieved investors. Q4 revenues of $46.3 million exceeded street expectations. That said, 2016 revenues were $200.6 million in contract to 2015’s figure of $249.9 million. Unfortunately, gross margins also decreased from 57% in 2015 to 40% in 2016. All of that led to a net loss of -$87.4 million which translated into a GLUU EPS loss of -$0.66 – far worse than 2015 when the EPS loss was just $0.06.

Analysts are still keen on Glu Mobile, Inc. (NASDAQ:GLUU). Of the four firms that follow the firm, three assign GLUU a rating of “Strong Buy” while the lone outlier has GLUU shares rated at a “Buy”. Their consensus price target is $3.

3/27/2017
Ticker Symbol GLUU
Last Price a/o 12:42 PM EST  $                      2.20
Average Volume                4,310,000
Market Cap (mlns)  $                  285.59
Sales (mlns) $200.60
Shares Outstanding (mlns) 134.08
Share Float (mlns) 104.59
Shortable Yes
Optionable Yes
Inside Ownership 1.00%
Short Float 12.69%
Short Interest Ratio 3.08
Quarterly Return -0.47%
YTD Return 9.79%
Year Return -27.30%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading.

Author: Steve Clark

Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.