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Glu Mobile (GLUU) stock shows signs of recovery amid near-term concerns

Shares of Glu Mobile Inc. (NASDAQ: GLUU) gained over 56% in the past six months and 32% in the past three months. The mobile game developer is expected to maintain the uptrend in the long term, helped by new game releases in 2020. The stock dropped over 4% Friday afternoon, despite showing signs of a recovery.

For the fourth quarter, the company had Design Home, Covet Fashion, and Tap Sports Baseball game titles for revenue generation. The company has concentrated its product development efforts towards developing games for smartphone and tablet devices. The majority of the revenue came from Apple’s iOS platform, with a significant contribution from in-app purchases.

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Image for representation. Courtesy: Daan Geurts on Unsplash

The company has been publishing game titles primarily in four genres: lifestyle, casual, mid-core, and sports and outdoors. These genres are aligned with Glu’s unique gaming prowess, with the potential to establish a strong-growth game. The titles are viewed either as ‘growth’ or ‘catalog’ games.

Glu Mobile relies on a very small portion of its total users for nearly all of its revenue – mainly generated from in-app purchases. The game title genres are likely to drive growth in the near term. However, the company will experience an increase in costs and expenses related to investments in title development.

The company has the advantage of buying mobile games already in the market, which helps it cut down on development risks. Maintaining game updates will likely drive substantial bookings growth for the company, using its own resources and expertise.

The company expects to expand its core portfolio, stack additional bookings from new title launches and focus on the two strategic growth priorities of cross-platform and acquisitions. Also, Glu Mobile is slated to release TSB 20 title on March 17, with global territory expansion to over 100 additional countries.

Read: Electronic Arts Q3 earnings review

The Diner DASH Adventures is expected to be a meaningful contribution in 2020, after achieving 8.8 million bookings in the fourth quarter. The Disney Sorcerer’s Arena is inching closer to the worldwide launch in late March and the Originals title is planned for mid-2020 global launch.

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This year, the company is expected to witness further expansion of its core business and stack additional bookings from new title launches. This could drive the stock higher. Investors believe that the company has a sustainable operating model for long-term growth and profitability.

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