Another celebrity has signed up with Glu Mobile (NASDAQ:GLUU), and once again shares of the casual-gaming app developer are moving higher on the news. Glu Mobile stock opened with a 23% pop on Thursday -- trading as much as 32% higher a couple of hours into the trading day -- after following up a ho-hum quarterly report with an announcement that it's pairing up with Taylor Swift to put out a new game come late December 2016.
Somewhere along the way Mr. Market has decided to ignore that Glu is lowering its guidance for 2016, primarily because the celebrity-fueled game it put out this past December -- Katy Perry Pop -- has failed to live up to initial expectations.
Often unseen are too many stocks shooting higher after posting a quarterly report complete with an unexpected deficit, declining year-over-year revenue growth, and a reduced outlook, but that's apparently the power of Swift. Glu Mobile announced an exclusive multi-year gaming partnership with the wildly successful pop star, and all appears to be right in the world.
The stock seems to be singing Swift's "Shake It Off" anthem, but a little history can't help. See, the stock rallied a year ago when it struck a similar multi-year exclusive mobile gaming partnership with Katy Perry. She was fresh off of her status-affirming appearance at the Super Bowl's halftime show, and the market assumed at the time that Glu would be able to catch the same lightning in a bottle that it did the previous summer when it teamed up with Kim Kardashian.
Kim Kardashian: Hollywood was a big hit for Glu in 2014, staying near the top of mobile app store charts for several weeks. The unexpected hit worked magic on Glu's stock, sending it on a delicious streak of four consecutive weeks of double-digit percentage gains.
We live in a new normal these days. The stock has given back all of those gains, and then some. The success of the Kardashian title made it easy to ink deals with other musical and reality show stars. Deals with Britney Spears, Nicki Minaj, and more recently celebrity chef Gordon Ramsay have been easy to strike on the assumption that they will have similar success. Perry's title fell flat, and if the wide slate of celebrity simulator games also disappoint it will make it that much hard to tie down shooting stars for exclusive multi-year deals.
We'll get another indicator on that front soon. Its Kendall and Kylie Jenner game is now in beta, and retention trends are encouraging so far. Glu will put out at least eight titles this year, and it needs either another Kim Kardashian: Hollywood-style hit -- that game generated $150 million in revenue in its first year -- or enough successes to keep celebrities, gamers, and investors coming.
If that's not the case you can be sure that it will be investors singing Swift's "Shake It Off" to the stock itself.
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