- Better monetization of games is a good sign.
- The launch of new titles should sustain Glu Mobile’s momentum.
- Falling short interest is a vote of confidence.
- The potential for a larger company to acquire Glu Mobile makes it worth a buy.
Shares of mobile gaming company Glu Mobile (NASDAQ:GLUU) have appreciated over 80% since I recommend it on November 4th. Glu was struggling last year but its fortunes have improved remarkably on the back of blockbuster games and strong gamer response. Glu is well positioned to sustain its bullish run. Let's take a look at the reasons why I think Glu Mobile is a great long-term buy.
A Solid Strategy
Glu is now reaping the success of the moves that it made in its past product cycle to monetize its games in a better and more efficient manner. Its strategy of focusing on leveraging platform strength and creating long-term gaming franchises has proved profitable. The launch of new games such as Robocop, Defenders & Dragons, and Motocross Meltdown have been key catalysts for Glu Mobile. Also, the launch of Deer Hunter on Facebook (NASDAQ:FB) is also driving adoption across a higher number of users.
Glu is also focusing on providing a high-end and innovative gaming experience to users. This is reflected in the launch of Spellista, which Glu especially developed for Google (NASDAQ:GOOG) Glass. Also, Glu had recently launched Eternity Warriors 3 with a full suite of GluOn features including real-time chat, player-to-player messaging, and guild tournaments. Such innovations and platform improvements should help Glu do well in the future.
Strong Development Moves
Glu is launching a celebrity game on its platform, partnering with Kim Kardashian. Glu is also focusing on international markets, such as Japan. It has entered into a strategic relationship with COLOPL to co-produce and publish a new game designed with market-specific content for players in Japan.
Recently, Glu, in collaboration with Moonmana, released another exciting multiplayer strategy game on the App Store and Google Play called Pirates of Everseas. In this engaging multiplayer game, players' primary objective is to construct a pirate fleet to take into a war and equip their home islands with resources which they will need to progress further. Glu is really excited about the prospects of the title and the company's President of publishing, Chris Akhavan, said:
Glu is excited to bring Pirates of Everseas to a global market. The combination of strategic gameplay, city-building, and social competition has resulted in a game that is truly fun to play. We think players will really enjoy the pirate-themed storyline, game play style and colorful artwork.
With many game developers present across the globe, Glu is focusing on developing a distinguished gaming experience to tap the market and achieve an iconic position in the competitive environment.
Glu is working on various aspects which should help it improve profitability. The company is focusing on more action and shooter genre games in 2014, as they have turned out to be quite popular so far. Instead of launching many new games, Glu is focusing on core game play, insisting on improving the monetization of each product and adding more competitive features.
Glu's improved user acquisition capabilities should give it a competitive advantage and lead to higher game downloads this year. Another strong growth driver is the strong performance from Eternity Warriors 3 the company is seeing in key markets such as Korea and China.
Shorts Are Retreating
Going forward, Glu Mobile has many catalysts that can drive its share price higher. Investors are now starting to realize the true potential of Glu, as the latest stats show a huge decline in short interest. Short interest in Glu dipped nearly 8.5% in the last 15 days of February as shorts are starting to retreat. Even after the uptick in 2014, many analyst firms like Zacks, Needham, Stifel Nicolaus etc. have given it a buy rating.
Since Glu Mobile is a small cap company, with market capitalization of $400 million, it is possible that a bigger company may buyout Glu in the future. The company's sturdy prospects, along with its highly efficient and small workforce roughly 550 people, makes it an ideal acquisition target for companies like Tencent (OTCPK:TCTZF) or Alibaba (ABABA), which are looking to gain traction in the mobile gaming market.
Glu Mobile has performed outstandingly well so far this year and there are solid reasons to believe that the company's positive momentum should continue. Hence, investors who have enjoyed this fairy tale ride so far should continue to hold on as Glu Mobile can soar higher in the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.