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Wednesday morning, shares of Glu Mobile fell as much as 5% on a seemingly bearish report that the company will owe Kim Kardashian royalties in excess of $85 million.

We have no reason to doubt their anchor fact that Kardashian is entitled to 45% of net profits from the game. However, there were material flaws in TMZ's analytical assumptions.

PTT Research has released a video correcting TMZ's errors, and provides analysis of the actual profits expected from its blockbuster hit; states that its $10 target could "easily prove conservative".

Wednesday morning, shares of Glu Mobile (NASDAQ:GLUU) fell as much as 5% on a seemingly bearish report from TMZ. The pop-culture website disclosed that Kardashian is slated to earn over $85 million in 2014 from the hit game, "Kim Kardashian: Hollywood". GLUU would be the source of that payout, with TMZ citing sources familiar with the deal.

TMZ also stated that the game is "set to gross a reported $200 million in revenue this year alone". Considering the marketing expenses typically incurred by GLUU, along with the fees it must pay to game distributors like Apple (NASDAQ:AAPL), investors are understandably concerned that the operating margins on this game will be significantly lower than expected.

However, TMZ readily admitted that they are "no mathematicians" before calculating the impact of their information. Indeed, TMZ is known as one of the more trustworthy sources of pop-culture information, so we have no reason to doubt their anchor fact that Kardashian is entitled to "45% of net profits" from the game. However, there were many flaws in TMZ's utilization of that fact in their analysis.

For starters, TMZ applied the 45% royalty figure to the game's $200 million revenue estimate, belying their own information that the 45% will be applied to net profits. A video has been made available on PTT Research's public blog site, detailing TMZ's assumptions. It also provides an in-depth analysis of the actual profits GLUU can be expected to garner from this hit title. Running through multiple scenarios, the video calculates that cash flow from this one game alone could exceed 50 cents per share in 2014.

Net-net, we believe that TMZ's information is a net positive for GLUU investors. If the site has indeed spoken with sources familiar with the situation, we can assign greater confidence to the possibility that "Kim Kardashian: Hollywood" will result in a $200 million revenue windfall for GLUU. Accordingly, investors should be focusing their attention on this estimate and this morning's press release from GLUU, disclosing that the company has achieved revenue, download, and DAU (daily active user) records with the Kim Kardashian and new Dino Hunter games.

Indeed, it appears that our price target increase to $10 (released via a Tuesday AM report) could easily prove conservative.

Disclosure: The author is long GLUU. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.