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Glu Mobile Stock Has a Lot to Prove This Week

There is a lot riding on Glu Mobile's (NASDAQ: GLUU) first-quarter results, slated to be released shortly after Monday's market close. The mobile gaming developer's earnings call will follow an hour after market close.

Investors were burned last time. The stock tumbled 13% the day after Glu Mobile offered up its fourth-quarter results, but momentum suggests that it won't happen again. The shares have more than made back the initial hit, hitting fresh all-time highs in April. 

Cover art for Tap Sports Baseball '19.

Image source: Glu Mobile.

Sticking the landing

Glu Mobile has been one of the market's biggest winners over the past few years. The stock nearly doubled in 2017 and more than doubled in 2018, and it's beating the market again so far in 2019. It's been a five-bagger during that meteoric run. The stock will inevitably be volatile following this week's financial update.

Investors have been treated to heady growth in recent quarters, fueled by the success of Glu Mobile's Design Home interior decorator simulator, Major League-licensed Tap Sports Baseball, and the outfit-sharing Covet Fashion app. Bookings soared 61% last year, and those three titles are accounting for the lion's share of the company's business and all of its growth. Gamers can be fickle, and that could be what's weighing on this afternoon's report.

Guidance in early February was calling for $88 million to $90 million in bookings for the quarter that ended in March, a mere 2% to 4% year-over-year advance. Glu Mobile's outlook for the full year calls for the pace to pick up -- with bookings rising 13% to 16% in 2019 -- but is still a far cry from its earlier gains. 

The silver lining here is that Glu Mobile has routinely landed ahead of its guidance. Third-party trackers of app download activity show Glu Mobile's biggest diversions holding up in recent months, but the game publisher will have to make it official in a few hours. Along the way Glu Mobile will have to prove that its pipeline of games will be strong enough to offset the inevitable fade of one if not more of the three workhorses that accounted for 77% of the revenue in its previous quarter. 

This year's installment of Tap Sports Baseball hit the playing field just as the quarter was coming to a close. The game has been gaining in popularity with every passing year, and Glu Mobile extended its licensing deal with Major League Baseball through 2024 earlier this year. The ideal report would find Glu Mobile beating its first-quarter guidance, boosting its outlook for all of 2019, and offering up some encouraging color on the updated baseball game. Glu Mobile quickly recovered from last February's post-earnings slide, but the market won't be so quick to forgive if it fails to impress this time around. 

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Rick Munarriz owns shares of Glu Mobile. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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