Buy Glu Mobile (GLUU) Into Q1 Results - Northland Capital Markets
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Northland Capital Markets analyst Darren Aftahi is out reiterated an Outperform rating and $7.50 price target on Glu Mobile (NASDAQ: GLUU) saying he expects solid results and would recommend accumulating shares on the recent dip.
- Our proprietary games analysis suggests upside to our 1Q non-GAAP smart phone revenue estimate of $38.6M, and management's overall revenue guidance of $38-$40M, driven by continued DH14 outperformance.
- Based on current DH14 rankings, we also believe that the company’s FY14 DH14 guidance of “less than 20% of total non-GAAP revenue” (implying ~$29.2M (or less) at the midpoint of guidance) may prove conservative.
- In short, DH14 has remained a top ~20-30 grossing game, and has more or less stabilized in this area. We note, its grossing rankings were roughly similar beginning 1Q as they were ending the Q.
- Perhaps overlooked, DH14’s game download rank has also stayed fairly steady at ~20-30 on both Apple (iPhone/iPad) and Android since late January. We believe this bodes well for advertising-related revenue, which bounced back to ~21% of total sales last Q.
- We estimate new games generated ~$8-9M in the Q (EW3, FLC 2, Motocross Meltdown, and Robocop)
Significant pullback in stock creates opportunity. Shares of GLUU have pulled back ~33% and now trade at ~2.0 EV/’14E sales. We would use this weakness to accumulate as we believe the fundamental story is intact.
Shares of Glu Mobile closed at $3.88 yesterday.
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