Glu Stock Forecast: Weak Games Portfolio Makes Glu Games a Short Candidate

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Glu Stock Forecast

Summary:

  • ThinkGaming’s data revealed that Glu Games has no mobile game among the top 50 top-grossing iPhone games in America.
  • A mobile games publisher that has no title that attracts big spending American iPhone gamer is in big trouble.
  • Glu Games’ celebrity-themed mobile games are not enough to help the company improve its growth potential.
  • Unless Glu Games starts creating games in the top-grossing strategy and social casino genres, it will die a painful death.
  • GLUU has very strong sell signals based on the near and long term algorithmic forecasts from I Know First.

It is unfortunate but I’m recommending that investors avoid Glu Games (GLUU) this year. Recent data convinced me that Glu Games has little to no chance of reversing its persistent poor business performance. Glu’s inability to repeat the early success of its Kim Kardashian: Hollywood game caused its stock to suffer a one-year return of -47.48%. I am afraid GLUU still has downside potential.

Recent 30-day data from ThinkGaming revealed that Glu Games has no games that belong to the top 50 highest-grossing iPhone games in America. It is also troubling that the estimated average daily sales of Glu Games from American iPhone gamers is only $102k.

gluu1(Source: ThinkGaming)

America is the no.2 market for mobile games and Glu Games is failing to attract enough U.S. mobile gamers. Any game publisher that generates very little revenue from American players is in big trouble. Weak revenue from U.S. mobile gamers will only worsen Glu Games’ already declining quarterly revenue since Q2 2015.

GLUU’s terrible one-year performance coincides with its declining quarterly revenue and worsening losses. The chart below is already good excuse to short GLUU.

(Source: CMLviz.com)

Wordwide Monthly Net Sales Are Also Terrible

Based on the August data of SensorTower, Glu’s mobile games are also not doing well. As per SensorTower’s data, Glu’s Racing Rivals’ August iOS and Android net sales (30% cut of Apple (AAPL) and Google (GOOG) was already deducted) was only $1.1 million. Tap Sports Baseball 2016’s August Android/iOS net sales was only $1.2 million.

It is also high time that Glu Games quit its focus on celebrity-themed mobile games. Kim Kardashian: Hollywood’s August net sales was only $1.0 million. Gordon Ramsay DASH also had net sales of only $1 million last August. The Kendall and Kylie Android/iOS game only netted $260k in August. Britney Spears: American Dream’s global net sales was only $30k.

Enough of Celebrity-Themed Mobile Games

The terrible August revenue of celebrity-themed mobile games should be enough reason for Glu Games to quit the said genre. It should focus more on developing new games that appeal to a broader base of players. Except for Candy Crush, the top-grossing iPhone games in the world either belong to the fighting genre or the social casino genre.

It is high time that Glu Games starts developing a clone of Supercell’s Clash Royale strategy fighting game. Glu Games should also try to come up with a copycat version of Bigfish Casino – Free Vegas or Marvel Contest of Champions. Instead of paying royalty/licensing fees to Kim Kardashian or Britney Spears, Glu Games should endeavor in licensing popular game assets like Marvel, X-Men, and DC Universe superheroes to create fighting/strategy mobile games.

Clash Royale generates an average daily sales of $1.97 million just from iPhone gamers in America. It is a big mistake that Glu Games still refuses to create a clone game of Clash Royale when it is obvious that many big spending players like the said game.

gluu3

(Source: SensorTower)

Conclusion

I write mostly for the buy-side community. However, Glu’s obvious lingering mistakes has made it a very good candidate for the sell-side team. I rate GLUU as a Short. The management appears to be unable to change its liking for celebrity-themed mobile games even though they are unprofitable.

It might prove profitable to short GLUU before the company reports its Q3 2016 earnings next month. Weak U.S. and global net revenue from its games means Glu Games will likely report lower revenue and bigger losses next month. GLUU also has strong sell signals based on the market trend algorithmic forecast of I Know First.

gluu4

I Know First Past Success With GLUU

I Know First has been bullish on GLUU in past forecasts. On January 24th, 2016, an I Know First analyst wrote a mid-term bullish article regarding GLUU. Even from that point in time it was apparent to I Know First that GLUU was not a long term pick, for a 1 year length. During the 3 months prediction, for the bullish mid-term outlook, GLUU had a 29.01% increase, as correctly predicted by the algorithm.

screen-shot-2016-10-09-at-5-14-59-pm

This forecast was sent out to I Know First subscribers on January 20th, 2016. To subscribe now click here.


premium