Shares of Glu Mobile (NASDAQ:GLUU) got an initial boost on Monday after a Wall Street pro boosted his rating on the stock, but the real test will come on Wednesday when the mobile gaming specialist announces its latest quarterly results.
Glu Mobile stock opened 5% higher on Monday -- hitting its highest levels since last summer -- following Roth Capital analyst Darren Aftahi's upgrade. He is raising his rating on the stock from neutral to buy, encouraged by the potential upside in Wednesday afternoon's report.
Aftahi's proprietary analysis indicates that bookings may have come in ahead of his earlier forecast, and that the new quarter is also tracking ahead of Wall Street expectations. He is raising his price target from $2 to $3.25, a move suggesting that there's 31% of upside from yesterday's close.
The initial pop after Aftahi's upgrade didn't stick. Glu Mobile stock only closed out the day with a 2% increase, giving up more than half of its initial gains. However, the moment of truth will come shortly after tomorrow's market close when the casual-gaming app publisher reveals and discusses its fourth-quarter performance.
Word on the Street
Wall Street isn't holding out for much when it comes to Glu Mobile's fourth quarter. Analysts see $46.9 million in adjusted revenue, 19% below where it landed during the prior year's holiday quarter and 36% off when its top line peaked at $72.9 million during the fourth quarter of 2014.
Glu Mobile was a niche player in mobile games with its Tap Sports, Cooking Dash, and Deer Hunter franchises until the summer of 2014 when Kim Kardashian: Hollywood gave the company its biggest hit to date. The celebrity simulator shot up the app charts, helping Glu Mobile sign similar deals with Nicki Minaj, Gordon Ramsay, and even some other Kardashians. None of the subsequent releases have managed to gain the kind of traction that Kim Kardashian: Hollywood did, and Glu Mobile's financial performance has felt the pinch.
Glu Mobile's gross bookings have declined sequentially in six of the past seven quarters, a streak that will stretch to seven of the past eight on Wednesday unless even Aftahi is underestimating the quarter's performance.
Wednesday's report will be the first with Nick Earl as its new CEO. He took the helm in November, and the move to more than double his stake in the company by buying 100,000 shares on the open market at an average price of $2.09 is already paying off with the stock trading nearly 20% higher. Wednesday will be his first big test, and between his insider buying three months ago and Roth Capital's upgrade this week, a couple of people that know the company well are willing to stick their neck out in bullish fashion. Investors should appreciate that kind of well-timed confidence.