Gluu Stock Analysis: Glu Mobile’s Downfall Shouldn’t Tempt Long-Term Investors

ayushThe article was written by Ayush Singh Tip Ranks #4 Financial Blogger – Senior Analyst at I Know First


Glu Mobile’s Downfall Shouldn’t Tempt Long-Term Investors

Gluu Stock Analysis

When I started out as a financial blogger, I was very bullish on mobile gaming companies. Given the expected growth in the mobile gaming sector, I used to believe that the likes of Zynga (ZNGA) and Glu Mobile (GLUU) are poised to be long-term winners.

According to research from intelligence firm Digi-Capital, mobile gaming industry was estimated to reach $88 billion in value in 2015. The firm is also forecasting that the sector will continue growing at a CAGR of 8% from 2016 and will surpass the $110 billion mark by 2018.

Gluu Stock Analysis

(Source: Digi-Capital)

However, I later realized my mistake and inferred that it is impossible for any particular mobile gaming stock to continue dominating the market in the long-run.

My bullish calls on Zynga yielded negative returns. However, as for Glu Mobile, I was able to right my mistake and reversed my stance at the correct time. Consequently, as you can see from the image below, my calls on Glu Mobile have returned over 20% annual profits.

Gluu Stock Analysis


Glu Mobile’s has been pretty volatile over the years. However, the stock has been moving downwards ever since the company announced a significant guidance cut for Q4. During the Q3 conference call, Glu Mobile’s management announced that it expects Q4 revenues to be in the range of $50 million-$52 million, significantly below expectations for $94.2 million, and EPS of -$0.02 to -$0.03, lower than consensus of a $0.06 per share.

For the full year, Glu Mobile is forecasting revenues of $234.3 million-$236.3 million (way below consensus of $273.4 million) and EPS of $0.06-$0.07.

Still not a long-term stock

Going forward, I still think Glu Mobile is not a stock that long-term investors should consider buying. The mobile gaming industry is a cyclical business and is it impossible for any single company to dominate the sector for a long period of time. Due to the small size of smartphones, developing a viral game is difficult. And even if a company manages to develop a viral game, it stays popular for a limited amount of time. While the company enjoys strong profits in that time, it begins struggling ones the popularity of those games starts waning. And it is impossible for any company to regularly come up with viral games.

This is evident by the fact that all the companies that have developed popular games in the last few years are currently struggling. Angry Birds maker Rovio, Glu Mobile, Zynga, etc. are all struggling to reach the peak of their glory days. Due to the waning popularity of their hit titles and the companies’ inability to replace them with new titles, the companies are struggling.

What makes the matters worse for pure-play mobile gaming companies is the fact that the mobile gaming sector is very fragmented and highly competitive. Although the industry is growing at a rapid pace, the lack of entry barriers has made the space very competitive and fragmented.

Developing a viral game doesn’t always require huge capital investment or a big team of developers. This is evident by the fact that many viral games like Angry Bird and Clash of Clans (highest grossing mobile game ever) were developed by a very small team of individual developers.

There are hundreds of thousands of registered app publishers on both Android and iOS. Hence, due to the lack of significant entry barrier, the mobile gaming industry has become extremely fragmented. Clearly, the success of any upcoming mobile game can’t be predicted beforehand. While advertising may help the game gain traction in the early days, the long-term success of the game depends on it “going viral”.


Due to the fragmented nature of the mobile gaming industry and the lack of entry barriers, I think long-term investors should stay away from stocks like Glu Mobile. Glu Mobile’s stock has been pretty volatile and ranges bound over the last few years. Although the stock is trading near the bottom end of the range band, it may move higher in the short-term. However, due to the reasons mentioned above, I think Glu Mobile is not a viable long-term investment option.

My outlook on Glu Mobile coincides exactly with the long-term bearish algorithmic forecasts of I Know First. I Know First uses an advanced state of the art algorithm based on artificial intelligence and machine learning to foresee market performance for more than 3,000 markets including stock forecasts, world indices, commodities, interest rates, ETFs, and currencies.   The algorithm generates a forecast with a signal and a predictability indicator. The signal is the number at the center of the box. The predictability is the figure at the bottom of the box. At the top, a particular asset is identified. This format is standardized across all forecasts. The middle number indicates strength and direction, not a price target or percentage gain/loss. The bottom figure, the predictability, signifies a confidence level.

Gluu Stock Analysis

As you can see from the chart above, the green 1.29 and 19.66 forecasts show that the stock can move higher in the short-term. However, the red -44.80 1-year indicates that Glu Mobile will head lower in the long-term. Hence, I think long-term investors shouldn’t buy Glu Mobile.

Previously I Know First predicted GLUU’s Stock bullish movement from Dec 13th, 2015. We can observe that in only three days GLUU managed, with a signal of 10.72 and predictability of 0.14, to bring returns of 12.54% in such a short period of time.

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