Shares of mobile gaming company Glu Mobile (NASDAQ:GLUU) have turned in a patchy performance this year. Glu's shares are up almost 7% this year, despite the recent sell-off in tech stocks. However, the company's long-term prospects look promising on the back of its solid presence on Apple's (NASDAQ:AAPL) app store and the fact that the smartphone giant is looking to expand its addressable market with bigger phones.
With Glu expected to report first-quarter earnings on April 30, let's take a look at what's expected from Glu and how its outlook might look like.
Analysts, according to Yahoo Finance, expect Glu to post revenue of $39 million. This would translate into a massive year-over-year gain of almost 60%. In addition, Glu's bottom line is expected to grow from a loss of $0.03 per share last year to a profit of $0.02 per share in the first quarter.
The company should be able to meet these estimates on the back of a solid performance from Deer Hunter 2014. Also, Glu had projected a solid forecast for the current year the last time it reported earnings. The company expects to post revenue of $142 million to $150 million this fiscal year and a profit of $0.00 to $0.02 a share. In comparison, analysts had expected it to incur a $0.05-per-share loss on revenue of $121 million.
Hence, Glu mobile expects some solid growth numbers going forward, and this indicates that the company's results should be in line with estimates, at least.
Glu Mobile's investments over the past five quarters have begun paying off generously. It has made sizable strides to monetize its games in a better way, optimize games more predictably, and market its titles more efficiently.
Glu is focused on leveraging its platform strengths and early-mover advantage to create long-term gaming franchises. Till now, it has built four successful franchises in its portfolio, which are Contract Killer, Frontline Commando, Eternity Warriors, and Deer Hunter. The company expects these games to continue performing well this year, and Glu's expected revenue and earnings for the year confirm the same.
In December, Glu had launched Eternity Warriors 3 with a full suite of GluOn features, including real-time chat, player-to-player messaging, and guild tournaments. During January, it launched three new free-to-play games, including RoboCop, Defenders & Dragons, and Motocross Meltdown. Glu also launched Deer Hunter 2014 on the Facebook (NASDAQ:FB) platform. These new games should drive the company's results this year.
Looking to get better
Glu is looking to double the lifetime revenue of each new game that it will be releasing. The company seems to be on track to attain this goal with both Deer Hunter 2014 and Eternity Warriors 3. The additional Q1 launches of RoboCop and Motocross Meltdown are also expected to follow the same trend.
Moreover, Glu's core operational focus will remain on action titles for the entire year, and it plans to continue its games-as-a-service evolution. It has global distribution and localization capabilities, along with deep Android platform expertise.
Glu's franchise diversification and ability to leverage central services for all its studios has created a superior and highly scalable risk profile. It is highly focused on delivering strong year-over-year growth with its operating functions rolling in unison. Moreover, there is ample opportunity to expand in the free-to-play games industry that has grown exponentially worldwide with the emergence of smartphones.
Growing with smartphones, especially Apple
Glu is uniquely positioned with Apple, Google, and Microsoft (NASDAQ:MSFT) to extend its gaming portfolio. For example, Apple accounts for nearly two-third of Glu Mobile's revenue. Now, Apple is looking to increase its footprint across the globe by launching bigger-screen devices. As reported by CNET -
"iPhone 6 4.7/5.5 phablet: There certainly has not been a dearth of iPhone 6 rumors, so this part of the Kuo's report was probably the least revelatory. He essentially repeated rumors of 4.7-inch and 5.5-inch iPhones while offering a few additional details.
The 5.5-inch model may be positioned as a phablet, according to the analyst. It will come out "later in the holiday quarter," and may eat into sales of the iPad Mini. The 5.5-inch model will pack a big battery with "50% to 70% more watt-hours" than the 5S.
Only the high-end phones, such as a 64GB version of the 5.5-inch device will get a sapphire screen cover, according to the analyst.
The 4.7-inch model will be the most popular, Kuo claims, with full-year shipments hitting about 60 million units.
This is a brilliant move by Apple, since phablets are in great demand. As reported by USA Today-
"Juniper Research, a firm based in Great Britain that analyses the global mobile communications industry, issued a report this week that predicted that the phablet "could become a growth area" for smartphone vendors. It estimates shipments of more than 120 million units worldwide by 2018, growing from about 20 million units this year."
Since Glu derives most of its revenue from the iOS platform, Apple's move into the phablet category will open up new avenues for growth.
Glu's shares might not have increased dramatically this year, but the company looks well-positioned for growth going forward. A strong portfolio of games and innovative moves, along with a strong presence on the Apple platform should help Glu perform well in the long run, making it a good buy.
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.