Glu Mobile (GLUU) investors have been living under a cloud of uncertainty over the past three months, fearing that the mobile gaming company has run out of luck. Glu delivered a mixed forecast when it released its first-quarter results back in May, causing investors to lose confidence and dump the stock.
That was not surprising, since Glu Mobile has a history of going through long periods of weak growth as the popularity of its games starts waning. But Glu has a chance to get things back in order when it releases its fiscal second-quarter results on Aug. 1, and a lot will be riding on the company's outlook.
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Investors will be watching this critical Glu Mobile metric
Wall Street punished Glu stock after its first-quarter results because the company's bookings guidance was not up to expectations. The company called for second-quarter bookings between $100 million and $102 million, which was lower than analysts' $107 million estimate.
Bookings are an important metric for Glu Mobile because they refer to the amount of money a user has committed to spending with the company. When a user playing a Glu Mobile title decides to spend money or subscribe to any in-game purchases, it counts as a booking. Therefore, bookings provide a measure of how much revenue the company is going to generate in the future.
This is the reason a miss on this front was not taken kindly last quarter. But, investors are probably missing the bigger picture here because Glu Mobile raised its full-year bookings guidance.
The company expects full-year bookings of $450 million at the midpoint of its guidance range, a number that was actually better than the market's expectations. Assuming that Glu manages to hit that mark, its full-year revenue could grow more than 20% as compared 2018 revenue of $366.6 million. This is because Glu Mobile's revenue and bookings have historically moved in tandem.
|
Year |
Non-GAAP Revenue |
Bookings |
|---|---|---|
|
2015 |
$242 million |
$242 million |
|
2016 |
$201 million |
$214 million |
|
2017 |
$287 million |
$320 million |
|
2018 |
$366 million |
$385 million |
|
2019 |
To be announced |
$450 million (estimate) |
Data Source: Glu Mobile. GAAP = generally accepted accounting principles.
There's no reason for investors to panic based on just one quarter's guidance because the company looks all set to deliver yet another year of strong growth. Moreover, don't be surprised if Glu Mobile's second-quarter bookings come in better than expected.
Its first-quarter bookings of $92.6 million were well above the higher end of the company's guidance of $90 million. It's quite possible that Glu could blow past expectations once again.
New titles should ensure a bright outlook
Glu Mobile is sitting on a strong pipeline of games, with many of them hitting the market between May and August this year.
WWE Universe, a title developed by Glu as part of a multiyear agreement with WWE, has already been launched. The mobile gaming specialist will be hoping this title strikes gold, as it has been developed by the same studio behind the successful Tap Sports Baseball franchise.
Diner DASH Adventures was released toward the end of June, while the company expects to launch Disney Sorcerer's Arena in August. All these new games suggest that Glu Mobile is going into the second half of the year with a lot of momentum.
Don't be surprised to see Glu raising its bookings guidance once again based on the success of these games. If Glu manages to do that, it won't be difficult for the mobile gaming stock to regain investor confidence.
