Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of mobile game company Glu Mobile (GLUU) surged on Thursday after the company blew past analyst estimates when it reported its first-quarter earnings. Glu also announced that Chinese Internet company Tencent was investing in the company, taking a 14.6% stake. Up as much as 26% on Thursday morning, by 12:45 p.m. shares had settled a bit, though still up 20% from the previous close.
So what: Glu reported revenue of $62.44 million for the first quarter, up 33% year-over-year and nearly $11 million better than what analysts were expecting. The wildly popular Kim Kardashian: Hollywood continued to drive results for the company, along with other games like Racing Rivals and Deer Hunter 2014.
Non-GAAP EPS of $0.02 was better than the one-cent loss that analysts were expecting, although it declined from $0.06 during the first quarter of 2014. On a GAAP basis, Glu reported EPS of $0.01, slightly better than a break-even first quarter last year.
The other news driving Glu's stock price today was an investment from Tencent, which operates the popular WeChat mobile messaging platform. Tencent is investing $126 million in the company, good for a 14.6% stake. With Tencent being a major player in the Chinese mobile gaming market, this partnership could help Glu further penetrate that market.
Now what: Glu has found great success launching games based on celebrities, and that strategy will continue. Upcoming games based on Katy Perry and Britney Spears are planned, and the company no doubt hopes that these will prove just as popular as Kim Kardashian: Hollywood.
While Glu had a great quarter, its future success depends on the company being able to continually churn out addictive mobile games. The Tencent investment gives the company a big pile of cash to work with, but mobile gaming is an intensely competitive market, and Glu's past success doesn't guarantee success in the future.
