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Why Glu Mobile Stock Dropped 13% After Earnings

By Rich Smith – Aug 5, 2020 at 2:12PM

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Glu misses on both sales and earnings in Q2.

What happened

Shares of mobile games-maker Glu Mobile (GLUU) dropped sharply on their first day of trading following fiscal second-quarter earnings yesterday evening, falling 13.1% through 1:30 p.m. EDT.  

Analysts had forecast that Glu would report a profit of $0.08 per share for the quarter and revenue of $165.3 million. As it turned out, Glu missed on both points. Sales came in at only $133.3 million, and the company lost $0.05 per share for the quarter.  

GAME OVER on an 8-bit videogame background of blue sky and clouds.

Image source: Getty Images.

So what

Bookings, indicative of future revenues, grew a strong 79% in the quarter, and management raised guidance for full-year bookings to a range of $538 million to $548 million. Regardless, actual revenues grew only half as fast as bookings -- 40% -- in the quarter, and the gross margin earned on those revenues slimmed by 30 basis points to 64.3%.

Worst of all, of course, was the net loss -- $0.05 per share versus a $0.02 per share profit a year ago -- despite the company growing its share count by 8%, a fact that split up the loss among fewer shares, actually reducing the amount of the per-share loss from what it otherwise would have been.

Now what

Glu management did not provide estimates of third-quarter or full-year revenues or earnings -- or any other generally accepted accounting principles (GAAP) guidance for that matter -- limiting itself to predicting future "bookings" and other non-GAAP metrics. For what it's worth, though, analysts are once again forecasting a profit for the current third quarter ($0.13 per share), alongside much muted growth of just 6% in sales ($127.8 million) and a full-year profit of $0.34 per share.

Having been burned once already for trusting in analyst estimates, however, it appears investors are less likely to give those numbers the benefit of the doubt a second time.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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