Why I Took A Flyer On This $4 Social Gaming Concern

| About: Glu Mobile (GLUU)
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A small social gaming company recently came onto my radar while researching small capitalization picks with reasonable valuations and no exposure to the continuing sovereign debt crisis in Europe.

7 Reasons to take a flyer on Glu Mobile (NASDAQ:GLUU) at $4 a share:

  • Now that Zynga (NASDAQ:ZNGA) has gone public in its recent IPO, there is more focus on this space and Glu Mobile might show up on more investors' buy lists.
  • In addition, Zynga could be make a logical buyer of Glu Mobile given its new cash hoard. This would establish Zynga in the mobile gaming space (It is the #1 developer in this area for the android platform).
  • The company is rapidly increasing revenues. It had sales of around $73mm in FY2011, but is expected to generate revenues of $84mm in FY2012 and $121mm in FY2013.
  • Although it is currently losing money, it is projected to earn 19 cents a share in FY2013.
  • It has easily beat earnings expectations in each of the last four quarters and Northland Securities just initiated an "Outperform" a little over a week ago.
  • The median price target for the five analysts that cover GLUU is $6, more than 40% above its current stock price.
  • The stock just crossed over its 200 day moving average and is showing good technical strength (See Chart)

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  • It has over $32mm in net cash on the balance sheet and showed positive operating cash flow in FY2009 and FY2010 despite negative net income.

Disclosure: I am long GLUU.