Benefit From Mobile Gaming Growth With This Stock

Glu Mobile (GLUU) is off to a solid start in 2014 with impressive results, driven by strong execution and the popularity of its games such as Deer Hunter and Eternity Warriors.

Glu Mobile has a huge opportunity to expand its business further as the mobile market is continuously expanding and more people are seen playing games on their smartphones and tablets. Also, Glu Mobile gets most of its revenue from its partner Apple's app store that should grow in the future as Apple is bringing in various new devices that will help Glu in a big way. Let's take a close look at its recent results and see why the company can be a good buy for the long run.

A comparatively good performance

Glu Mobile's core fundamentals such as revenue and operating profit were quite impressive in the quarter. The company posted revenue of $47 million, an increase of 90% year-over-year, beating analysts' estimates of $39.5 million for the quarter. Also, the company was able to register a net operating income of $5.8 million, up from a net loss of $2.2 million in the corresponding period last year.

Also, the company is expected to perform well in the market going forward as it is a leading developer and publisher of free-to-play games for smartphones and tablets.

Strong pipeline

Glu Mobile's games such as Deer Hunter and Eternity Warriors are gaining traction in the market. Besides, Glu Mobile is focused to bring in various top grossing games on these platforms. Glu Mobile has electrifying games such as Contract Killer 3, Hercules, and Tap Sports: Baseball, on the way.

Glu Mobile is also expected to benefit from its action shooter game RoboCop that it had launched earlier this year. RoboCop has been very impressive and performed well after its launch. It accounted about $3.5 million in revenue. Glu is looking to keep this momentum in action shooter games going with its upcoming James Bond title, which is again very exciting and will drive its growth going forward.

Apple prospects

However, Glu Mobile has a big challenge ahead as Apple has made 17-plus age ratings a universal standard for any shooter app on the App Store worldwide that could dampen its market share. This change could also adversely impact download volumes of some of Glu's biggest franchises, according to management. Hence, this is a point that Glu investors need to watch going forward.

Nevertheless, Glu Mobile is expected to benefit going forward as Apple is planning to launch two new iPhones this year, one with a 4.7 inch screen and another with a 5.5 inch screen. A bigger form factor should enable Apple to appease those consumers who had stayed away from the company's phones due to the lack of a big screen.

Hence, Apple is expected to take away a significant market share from leading Android players such as Samsung and LG with a larger device. This will also result in an increase in the reach of the Apple app store, which accounts for a majority of Glu Mobile's revenue.

An important acquisition

Apart from this, Glu's acquisition of the Deer Hunter intellectual property from Atari back in 2012 has played a key role in the company's growth so far. Encouraged by the performance of this acquisition, Glu is acquiring PlayFirst, which has popular intellectual properties such as Diner Dash, Cooking Dash, Wedding Dash, and Hotel Dash that should increase its profitability going forward. These games have been downloaded over 750 million times in the last decade, spread across several platforms. So, Glu's growth can receive a big boost as a result of this acquisition.

Conclusion

With shares gaining more than 60% in the last one year, Glu's current outlook indicates potential growth and its shares could be soaring going forward. Also, its revenue in the current fiscal year is expected to increase a whopping 40%, and the company is also expected to turn in an annual profit on a non-GAAP basis. So, even after a solid run, Glu Mobile is still a good investment.

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