Markets

Why Glu Mobile Stock Dropped 13% After Earnings

What happened

Shares of mobile games-maker Glu Mobile (NASDAQ: GLUU) dropped sharply on their first day of trading following fiscal second-quarter earnings yesterday evening, falling 13.1% through 1:30 p.m. EDT.  

Analysts had forecast that Glu would report a profit of $0.08 per share for the quarter and revenue of $165.3 million. As it turned out, Glu missed on both points. Sales came in at only $133.3 million, and the company lost $0.05 per share for the quarter.  

GAME OVER on an 8-bit videogame background of blue sky and clouds.

Image source: Getty Images.

So what

Bookings, indicative of future revenues, grew a strong 79% in the quarter, and management raised guidance for full-year bookings to a range of $538 million to $548 million. Regardless, actual revenues grew only half as fast as bookings -- 40% -- in the quarter, and the gross margin earned on those revenues slimmed by 30 basis points to 64.3%.

Worst of all, of course, was the net loss -- $0.05 per share versus a $0.02 per share profit a year ago -- despite the company growing its share count by 8%, a fact that split up the loss among fewer shares, actually reducing the amount of the per-share loss from what it otherwise would have been.

Now what

Glu management did not provide estimates of third-quarter or full-year revenues or earnings -- or any other generally accepted accounting principles (GAAP) guidance for that matter -- limiting itself to predicting future "bookings" and other non-GAAP metrics. For what it's worth, though, analysts are once again forecasting a profit for the current third quarter ($0.13 per share), alongside much muted growth of just 6% in sales ($127.8 million) and a full-year profit of $0.34 per share.

Having been burned once already for trusting in analyst estimates, however, it appears investors are less likely to give those numbers the benefit of the doubt a second time.

10 stocks we like better than Glu Mobile
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Glu Mobile wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 2, 2020

 

Rich Smith has no position in any of the stocks mentioned. 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.

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More