Pat McKeough responds to many requests from members of his Inner Circle for specific advice and stock tips as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.
This week we received a question from an Inner Circle member about a company that is in the “gaming” business. Glu Mobile develops games for smartphones and tablets and gives them away free, making money by selling additional content to players, and through advertising. Pat examines the company’s business, including its latest release and a recent celebrity partnership. He also looks at whether the company’s shares are likely to go on another run, after rising with the popularity of one game and then falling back.
Q: Pat: Can I have your opinion on Glu Mobile? Thanks.
A: Glu Mobile (symbol GLUU on Nasdaq; www.glu.com), develops games for smartphones and tablet computers.
The company gives its games away for free, and generates revenue by selling a variety of additional content and features to players. Glu also sells advertising that it imbeds in its games.
The company’s better-known games include Contract Killer, Deer Hunter, Eternity Warriors and Frontline Commando. They are playable on a range of platforms, including the iPhone, Android devices, Windows Phone, Facebook and Macintosh computers.
Glu just released Pirates of Everseas, a multiplayer game in which players must build a pirate fleet to take into battle and supply an island with the resources they’ll need along the way. Throughout the game, players can invite friends to play, form alliances and engage in quests to earn weapons and resources to protect their fleet.
The company has also announced that it is partnering with Kim Kardashian to develop a new celebrity lifestyle game that will include her likeness and voice.
Popularity of Deer Hunter helps drive up share price for Glu
Glu shares were as low as $2.10 in September 2013. They moved up to around $4 in early February 2014, as the company’s Deer Hunter 2014 game gained popularity.
After Glu released its 2013 fourth-quarter results in early February, the shares rose as high at $5.65 before moving down to today’s price of $3.96.
In the three months ended December 31, 2013, the company’s revenue jumped 62.1%, to $48.2 million from $26.4 million a year earlier, on Deer Hunter 2014’s success. It earned $0.07 a share, a big improvement over a $0.05-a-share loss. However, Deer Hunter 2014 accounted for about half of the company’s revenue in the latest quarter.
In the Inner Circle Q&A, Pat looks at Glu Mobile’s prospects and whether its shares are likely to regain momentum with the success of new games, or fall in light of a number of risks Pat discusses in his analysis. He also considers the possibility that Glu may be a takeover target. He concludes with his clear buy-hold-sell advice on this stock.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members
There seems to be no end to the popularity of mobile gaming. Do you believe this makes it a potentially fertile area of investment? Before investing in a stock in this area, would you try to get the opinion of someone in their teens or 20s?
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