Is Glu Mobile the Next Zynga?

Glu Mobile had a great year after bringing in a new monetization approach, and releasing a couple of hits. Will the company go to the next level?

Jan 14, 2014 at 1:30PM

Shares of mobile game publisher Glu Mobile (NASDAQ:GLUU) are up more than 70% in the past 12 months, outperforming most competitors, including Zynga (NASDAQ:ZNGA) and Electronic Arts (NASDAQ:EA).Bullish momentum was mainly driven by the company's latest hit, Deer Hunter 2014, which has achieved more than 40 million downloads so far.

Investors looking for exposure to mobile gaming need to consider how much upside potential is left after Glu Mobile's amazing one-year rally. With a market cap of $325 million, Glu Mobile is still a small player in the fierce gaming industry. Its focus on delivering quality content, strong product development capabilities, and new monetization approach suggest the company still has significant upside. Will Glu Mobile continue delivering solid top line performance?


Source: Glu Mobile Investor Relations

Glu Mobile could be the next Zynga
The games industry is well-known for being a "hit or miss" business. This is because, when it comes to games, consumers' preferences are quite volatile and unpredictable. However, certain companies have been able to consistently deliver top hits. An example is Zynga and its FarmVille series, which have generated more than $1 billion through in-game revenue.

Glu Mobile, which shows a genuine potential for developing hits, could be the next Zynga. More important, because Glu Mobile is building a solid portfolio of revenue-generating games, the company's potential revenue not only looks big, it also appears to be well-diversified. The company is a very efficient organization in terms of product development, because with less than 600 people, it has been able to release more than 70 games since December 2008. Just in the first quarter of 2013, the company released seven new titles, all of them featuring original intellectual property.  

Deer Hunter 2014 could bring millions in additional revenue
According to the latest earnings call, Deer Hunter 2014 added $2.7 million dollars to Glu Mobile's third quarter revenue in the 14 days it was available on iOS in the U.S. market. Since then, the game has also become available on Android devices. More important, the title has been successfully released in other regions, and it has remained in the top ten grossing games across all systems on AppAnnie. These facts suggest Deer Hunter 2014 could help Glu Mobile to beat its own fourth-quarter revenue estimate.

Glu Mobile will soon be profitable
Although Glu Mobile is not profitable at the moment, the company's new monetization approach and active release cycle suggest it may be able to cross over into profit early this year.

Early in 2013, Glu Mobile embraced the concept of "game as a service," in order to improve monetization. The company's monetization team used this new approach with its Heroes of Destiny title. The team changed the game's focus, from emphasizing single-player exciting experiences, to focusing on creating a consumable economy inside the game, with deep meta-game systems and socially driven gameplay.

Soon after the new approach was used, the game's average revenue per daily active user started improving considerably. In this way, Glu Mobile could benefit enormously from this new monetization approach. 

Borrowing ideas from EA Sports
Games publishers can build a strong brand faster by specializing in a particular segment. This approach was used by Electronic Arts, which specialized in the sports genre with its Fifa series. Now, according to Morningstar, Electronic Arts accounts for nearly 50% of sports game sales in the whole game industry. Glu Mobile seems to be taking a similar approach, by specializing in shooting games.

Final Foolish takeaway
Glu Mobile seems to be well prepared to go to the next level. The company's new monetization approach, specialization strategy, strong release cycle, and solid portfolio of games should contribute to a meaningful improvement in top line performance. Moreover, the firm's latest hit, Deer Hunter 2014, is set to bring millions in additional revenue, allowing Glu Mobile to cross over into profit early this year. 

The smartphone war's best-kept secret
Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Adrian Campos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information