Despite a range of coronavirus-related challenges negatively impacting the broader entertainment industry, 2020 wound up being a great year for most video game companies. The age of social distancing meant that people went out less, but that didn't mean they stopped looking for ways to have fun and socialize.

Demand for video games soared, and many industry-leading companies and franchises recorded record levels of engagement. However, growth for the global games industry is still just getting started. 

Glu Mobile (NASDAQ:GLUU) stands out as an intriguing player in the fast-growing world of interactive entertainment. The company has a market capitalization of roughly $1.65 billion -- making it the last publicly traded Western games publisher still valued in small-cap territory. I wouldn't bet on it staying there for long and consider it one of the most exciting investment opportunities in the industry. Here's why.

A person holding a light bulb in a sign reading 2021.

Image source: Getty Images.

What Glu Mobile does

Glu Mobile is primarily focused on creating mobile games geared at casual audiences. The company develops, publishes, and markets titles from its internal development studios and counts franchises including Covet Fashion, Design Home, and MLB Tap Sports Baseball among its most successful properties. Glu produces both original properties and games based on popular entertainment franchises. Its Kim Kardashian: Hollywood game was a strong performer through the years, and the recently released Disney Sorcerer's Arena is showing early signs of promise.

Glu Mobile's core business model revolves around releasing free-to-play mobile games that can attract a sizable audience, and then selling in-game items to users. By creating content expansions that keep gamers coming back to its titles, Glu Mobile can extend the life of its franchises. Popular video games with long product life cycles can be hugely profitable, and strong tailwinds for the broader industry combined with encouraging execution from Glu have the stock looking like a breakout investment candidate. 

2021 is on track to be a huge release year

Glu Mobile has had a very strong year in 2020. The company is guiding for full-year bookings to grow roughly 32% year over year, and its share price has climbed approximately 58.5% year to date. As impressive as this year's run has been, the business looks primed for even better performance in 2021. 

The company is guiding for its annual bookings to grow between 8% and 10% -- without factoring in any contribution from new game releases. According to management, Glu is on track to release at least four new intellectual properties next year. One of these titles will come from CrowdStar, the development studio behind Design Home and Covet Fashion, and Glu's most successful development studio.

CrowdStar's upcoming lifestyle game Table & Taste, which focuses on food combinations and decor, could be another performance driver. Glu is also on track to release a hunting game, fishing game, and an unannounced new title. If the company scores a big hit with just one of its new releases next year, its stock could post dramatic gains. 

Other promising avenues to growth

Glu Mobile also has avenues of growth outside of its current software lineup and upcoming games. It recently integrated a real-world e-commerce store into Design Home -- allowing users to purchase real-world items including furniture, bedding, and lighting.

The in-game e-commerce platform launched with thousands of items, priced in a range between $10 and $1,500. This is an innovative new initiative that will likely take some time to pay off, and the market may not be ready for it yet, but the concept has the potential to be tremendously successful. 

Video games boast engagement levels that are superior to nearly every other entertainment medium under the sun, and their interactive nature creates unique opportunities for advertising and commerce. Glu's CrowdStar studio is particularly focused on the genre of "lifestyle" games, making the company uniquely well-positioned to take advantage of potential e-commerce store integration in games. 

Investors will get a deeper look at how the e-commerce experiment is performing next year, but that's not the only potential growth catalyst outside of the company's internal development studios that could deliver wins. Based on management's recent comments, the company will likely have some big acquisition news to announce in the not-too-distant future. 

Glu Mobile ended its third quarter with roughly $318 million in cash, net of debt, leaving the company plenty of flexibility to pursue internal development while also making some significant acquisition moves. Adding the right studio, or studios, next year could turn into a big performance driver. 

This small-cap stock could be a big winner

Glu Mobile has a valuation that leaves room for huge growth, and its combination of core video game software, upcoming in-development titles, and other growth projects at the company could power explosive performance. I think this small-cap stock stands out as one of the best bets for investors seeking to benefit from the growth of the global games industry. Expect it to be a big winner for long-term shareholders. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.