Did Glu Mobile Finally Deliver A Winner?

| About: Glu Mobile (GLUU)

Summary

Glu Mobile has again released a game with strong initial success from Tap Sports Baseball 2016.

Mobile sports games are starting to gain more traction and produce top 10 grossing games.

The stock remains a bargain with any mega hit from the baseball game providing a strong catalyst for appreciation in value.

After disappointing glitches with Kendall and Kylie sent the grossing numbers for the celebrity games below top 50 grossing ranks on the iPhone, Glu Mobile (NASDAQ:GLUU) might finally have a winner. The release of the third version of the Tap Sports Baseball franchise actually topped the download charts for a couple of days.

Source: Glu Mobile website

Even with the great performing game so far, the stock isn't gaining much traction. Investors have seen several games start off hot to only quickly fade. Below $3, Glu Mobile remains an incredible bargain even after several failed games. How much upside exists if the mobile game developer actually delivers some success?

Tap Sports Baseball Franchise

With the start of the professional baseball season, the company released the latest installment of the baseball franchise at the end of March. Tap Sports Baseball 2016 surprisingly soared up the download charts on the iPhone to place within the top five games for the first week. The previous versions were solid games, but never huge hits.

The key to the game is the simplistic play for a sport played on a small screen. My preference is playing on the iPad, but the vast majority of the playing time takes place on the iPhone. Tap Sports Baseball 2016 is already a top 20 grossing game with the baseball season hardly in progress.

The 2015 version had a successful outing, but the game didn't crack the top 20 grossing list. In fact, App Annie had the game as the 62nd grossing rank on April 11 last year. Tap Sports Baseball 2015 didn't become a top 30 hit until May. The game peaked on May 30, 2015, with a U.S. grossing rank of 22. By comparison, this year's version already ranks 16th.

Click to enlarge

Source: App Annie

Last year, Glu Mobile saw solid revenues during the baseball season averaging roughly $5.0 million for the two primary quarters of the baseball season. For Q215, the game generated $5.2 million in revenues and was only the fifth highest producing game for Glu Mobile.

Sports Potential

The interesting part is whether this baseball franchise can match the success of the Madden franchise for football. Electronic Arts updates the Madden NFL Mobile app on an annual basis unlike the baseball games where Glu Mobile produces a new app. After some initial struggles, the game became a top 10 hit and remains in that position today even long after the NFL season ended.

The game remains the biggest mobile hit for Electronic Arts (NASDAQ:EA) with ThinkGaming listing the daily revenue at roughly $150,000. In comparison, App Annie listed the game as the 31st ranked U.S. iPhone game last April 11. During football season, the game was regularly a top 5 grossing game producing at least $300,000 or more per day on the iPhone in the U.S. alone.

A baseball game will probably never match the success of football. At this point, ThinkGaming lists Tap Sports Baseball 2016 as generating daily revenues of around $107,000. The real question is whether the game can maintain annual success beyond the baseball season and into future versions.

Takeaway

Tap Sports Baseball 2016 has a long ways to go before proving that Glu Mobile isn't going to blow the initial success of this game with more glitches. At the same time, the sports games are gaining traction on mobile and history shows that the related games don't peak until a few months into the season.

This game alone won't solve the problems ailing Glu Mobile in the highly disappointing celebrity sector, but the stock remains a bargain below $3. A company with revenues still situated to top $200 million this year with an enterprise value of $200 million is a solid buy with tons of upside if this game or any other game becomes a mega hit.

Disclosure: I am/we are long GLUU.

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.

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