Glu Mobile (GLUU) stock took a hit when it guided Q2’19 bookings revenue below expectations. The reason for the lowered guidance was the increased UA spending from some of its competitors, which made Glu Mobile move its UA spending away from some of the key titles such as Design Home. Though Glu Mobile increased its yearly bookings guidance by $10M in the same announcement, it did not help much. We believe with reasonable confidence that Glu Mobile will handily beat the bookings revenue expectations for this quarter. This confidence comes from the unique ability to monitor the revenue progress of their key games during the quarter using publicly available relative ranking information.
Lowered Guidance Hits The Stock
Glu Mobile stock was on a roll since last year till recently. It more than doubled due to YoY strong growth in its growth games Design Home, Tap Sports Baseball, and Covet Fashion. Without any help from new games, Glu was able to guide double-digit growth quarter after quarter. On top of that, there was the tantalizing possibility of new games becoming growth games and providing a stacking effect. Glu was able to push out the release date of the new games on the strength of growing revenue from the growth games without much impact on the stock price.
All that changed when they guided for Q2'19 at $102M, which came below the analyst's expectation of $107M. The Glu Mobile management team went into some length to explain the reason behind the lowered guidance. In the quarterly call, Glu Mobile CEO Nick Earl said "... Starting in early February, we saw a significant uptick in aggressive UA campaigns from two casual game publishers. This had the effect of driving up CPI costs for Design Home, Covet Fashion, and Kim Kardashian: Hollywood. As a result, we've dialed back our UA spend for our
