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Can Evergreen Titles Drive Glu Mobile's (GLUU) Q4 Earnings?

Zacks Equity Research
Updated

Glu Mobile Inc. GLUU is slated to release fourth-quarter 2017 results on Feb 8.

Last quarter, the company posted a negative earnings surprise of 200.00%. Moreover, it has delivered an average negative earnings surprise of 100.36% in the trailing four quarters.

However, the mobile game maker posted revenues of $86 million in the last reported quarter, surpassing the Zacks Consensus Estimate of $81 million.

For fourth-quarter 2017, Glu Mobile expects bookings to be in the range of $75–$77 million.

We note that the company’s shares have gained 40.3% in the past year, underperforming the industry’s 49.8% rally.



Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Glu Mobile’s roster of games, especially evergreen titles, is one of its biggest positives.

In the last reported quarter, Glu’s significant bookings performance was driven by the remarkable growth of its social interactive interior design game, Design Home. The company is optimistic about the opportunities that Design Home and Covet Fashion offer in the genres of home and fashion.

Apart from that, MLB Tap Sports Baseball '17 and Kim Kardashian: Hollywood were a big contributor to revenues. Notably, the company’s Tap Sports Baseball generated $40 million in bookings in the third quarter, up 55% year over year. Bookings from Kim Kardashian: Hollywood increased 6% sequentially.

However, due to end of the MBL season, management anticipates TAP Sports Baseball to decline at an increasing rate in the soon-to-be-reported quarter, as observed in the prior years as well. Kim Kardashian: Hollywood is also not faring well when compared on a year-over-year basis.

Unfortunately, Glu’s other celebrity titles like Cooking Dash and Restaurant Dash: Gordon Ramsay is also losing popularity.

Therefore, the company’s latest shift toward developing a social networking app called The Swift Life for popular pop star Taylor Swift is prudent in our view. The app launched in December will enable the company to gain the support of the wide fan base of the singer. However, we don’t expect a significant contribution from it in the soon-to-be-reported quarter.

Moreover, rising competition from established players like Electronic Arts EA and Activision Blizzard ATVI remains a concern. Furthermore, we anticipate significant investment in the research and development of new game titles to be a potential headwind for the company and put pressure on margins.

Glu Mobile Inc. Price and EPS Surprise

Glu Mobile Inc. Price and EPS Surprise | Glu Mobile Inc. Quote

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What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates, if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Glu has a Zacks Rank #3 and its Earnings ESP is -9.09%. Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stock With a Favorable Combination

Here is a company which, as per our model, has the right combination of elements to post an earnings beat this quarter:

Applied Materials Inc. AMAT has an Earnings ESP of +0.57% and a Zacks Rank of 2.

More Stock News: This Is Bigger than the iPhone!

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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
 
Electronic Arts Inc. (EA) : Free Stock Analysis Report
 
Glu Mobile Inc. (GLUU) : Free Stock Analysis Report
 
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
 
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