Apple (NASDAQ:AAPL) plans to introduce the iPhone 5 on Wednesday. Some analysts have speculated that the company could eventually sell up to 250mm of the latest version of their juggernaut smartphone. Obviously the companies that supply some of the key components to the iPhone 5 like Qualcomm (NASDAQ:QCOM) and Omnivision (NASDAQ:OVTI) could be big winners if the iPhone 5 achieves analysts' predictions. The phone should also contribute to the accelerating transition to mobile gaming. One of the best positioned companies to take advantage of the secular trend is Glu Mobile (NASDAQ:GLUU) which I have owned and recommended since when it was under $4 a share.
Other possible catalysts for Glu Mobile:
- Gaming is already transitioning from the PC to mobile devices. Some studies in the U.S. and U.K. now show a 50/50 split on gaming time.
- The company already is experiencing remarkable mobile growth even before the rollout of the new iPhone. Glu Mobile grew its smartphone revenue by more than 100% Y/Y in its last reported quarter.
- The company has numerous sequels to its most popular games in the fourth quarter to take advantage of the rollout of the iPhone 5. A smart strategy.
- Given the predicted explosion of mobile ad spending, GLU's multi-platform offerings should enable the company to be a big winner here as well.
4 reasons GLUU is a great speculative buy at under $5 a share:
- The company has thrashed estimates the last four quarters, easily beating consensus and broke even on its last quarterly report.
- Glu Mobile is showing exponential revenue growth. It should turn in a 30% sales increase in FY2012 and analysts project more than 35% revenue growth in FY2013.
- The mean analysts' price target by the 16 analysts that cover the stock is $7, implying roughly 40% upside from the current stock price. It also has almost $25mm in net cash on its balance sheet.
- Given the company's small market capitalization ($300mm after subtracting cash), rapid revenue growth and expertise in mobile gaming; I think Glu Mobile has high probability of becoming acquired. The high call option premiums on the stock bear out that I am not the only investor that has that opinion. Facebook (NASDAQ:FB), Zynga (NASDAQ:ZNGA) and Electronic Arts are all trying to accelerate their presence in mobile gaming and would make logical acquirers.
Disclosure: I am long GLUU, QCOM. 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.