Tuesday was rough for Glu Mobile (NASDAQ:GLUU) investors. Shares of the mobile gaming company plunged 13% after it posted poorly received fourth-quarter results. It's a big hit for one of the hottest mobile gaming stocks over the past couple of years, but it's not much a setback when you stretch out your horizon beyond Tuesday's trading day.
Glu Mobile stock soared 88% in 2017, following that up with a 122% burst last year. A double-digit hit on mixed financial results stings, but even after Tuesday's drop the stock is still trading 10% higher in 2019. Glu Mobile had a pretty good January. Let's go over a few reasons why the developer and publisher of smartphone diversions is still on track to deliver its third year of monster gains in a row.
1. Its winners keep on winning
The three games that have been Glu Mobile's workhorses through most of the past two years continue to grow in popularity. Design Home, Tap Sports Baseball, and Covet Fashion saw their year-over-year bookings grow 46%, 38%, and 49%, respectively, for the quarter.
We're talking about a combined 44% growth in bookings for the three titles that accounted for 77% of the revenue mix. With total bookings at Glu Mobile up 19% for the period, this obviously means that the rest of its catalog declined in popularity -- but that's not a deal breaker. Mobile gamers are fickle, and obviously it's more important for a publisher's hot titles to keep smoking than to worry about slow fade of older catalog titles.
2. Guidance has historically been conservative
If you're a fan of watching history repeat itself, you'll be happy to know that Glu Mobile stock also took a hit after posting fourth-quarter results in early February last year. The shares declined 5% -- after initially being down as much as 12% -- the day after posting those financials. Investors at the time were disappointed by the bottom-line miss despite the top-line beat and guidance that suggested a larger-than-expected sequential drop in bookings for the current quarter (just as they are this time around).
Let's talk guidance. Glu Mobile sees $88 million to $90 million in bookings for the new quarter and $435 million to $445 million for all of 2019. Year-over-year growth of 2% to 4% for the current quarter and 13% to 16% for the year isn't very exciting, but let's size up where we were a year ago.
In early February of last year, Glu Mobile was targeting $72 million to $74 million in bookings for the first quarter of 2018, initiating its guidance for $325 million to $335 million for the entire year. Three months later we saw bookings for the first quarter clock in at $86.3 million. Glu Mobile would also go on to bump its full-year guidance higher every single quarter until it landed at $384.6 million.
There are no guarantees that the same scenario will play out now. However, it's comforting to know that mixed results and weak guidance also saw the stock take a hit the day the company posted the prior year's fourth-quarter results -- and the shares still more than doubled in 2018.
3. The pipeline is stronger than it was in 2018
Glu Mobile didn't have a lot of new releases last year. Outside of the annual springtime installment of its Major League Baseball-licensed Tap Sports Baseball franchise, the needle movers were existing games. Things could be different this year. Glu Mobile sees Diner DASH Town and its new World Wrestling Entertainment release contributing $20 million in combined bookings for the year, a figure that could prove conservative if either one gains traction. There is also the possibility that the deal it announced a year ago with Disney for Disney and Pixar releases to start bearing fruit in 2019. It also is updating its iconic Deer Hunter franchise with next-gen graphics and gameplay.
Like a pitcher that only gets better as he warms up throughout a game, Tap Sports Baseball continues to gain players with every annual update. Design Home and Covet Fashion continue to show resiliency, but if either franchise sputters in 2019, there will probably be other potential game changers to pick up the slack. Tuesday was rough, but this is still Glu Mobile's year to master.