Mobile-gaming company Glu Mobile (GLUU) continued to rise on Tuesday, with shares spiking over 3.5 percent in early trading on heavy volume. This comes during a month that has been extremely kind to Glu, with shares rising over 40 percent in the last month and four different analysts coming in with upgrades over the same period. While many may be in the habit of seeing Zynga (ZNGA) as the only real player in the market, and it’s tempting given Zynga’s market cap is almost ten times what Glu’s is. But Glu is starting to make waves in a way that has investors taking note.
Deer Hunter 2014 and…Profit Hunter 2014?
Glu’s October has been bolstered by the release of Deer Hunter 2014, one of its most popular titles. Released on September 20, the game quickly rose to the top spot for free games for iPhones, iPads, Macs, and the Android platform. It had over 5 million downloads within its first week of release, it reached 1 million downloads in a single day, reached the #1 free app ranking in 19 countries and the #1 free game ranking in 78 countries. Now, the company expects to make over $250,000 a day from the game’s premium users, with nearly 280,000 new downloads a day.
The success of Deer Hunter 2014 appears to have helped analysts see a future for Glu, despite the fact that it’s still failing to turn a profit consistently. On October 14, B. Riley & Co. upgraded Glu from neutral to buy and increased its price target from $2.75 a share to $3.75. The day after that, Northland Capital reiterated its outperform rating and increased its price target from $3.50 a share to $4 a share (essentially reversing their August 7 cut to Glu’s price target). Then the day after that, it was Canaccord Genuity (CCORF) reiterating its buy with an increase in the price target from $3 a share to $4. The Benchmark Company (MHFI) opted to wait another week before jumping on the bandwagon on October 22 when it reiterated a buy rating and increased the price target from $2.42 to $3.07. Clearly, the belief from many on Wall Street is that Glu’s model of free mobile games with premium services means profits are in the company’s future.
Optimism for the Future
Glu’s rapid rise appears to have the potential for staying power as it may have landed on a way to monetize a popular model. As the growth of mobile devices continues unchecked, in the United States and abroad, Glu’s simple business plan could prove a valuable one in the long run. “We believe we are just scratching the surface of the organization's performance potential and look forward to launching a strong portfolio of titles in Q4 and beyond,” said CEO Niccolo De Masi in the company’s Q3 earnings report.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer