Needham & Company Downgrades Glu Mobile (GLUU) to Buy amid Q3 Results, Weak Q4 Outlook

November 2, 2012 8:26 AM EDT
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Price: $2.34 +2.18%

Rating Summary:
    7 Buy, 8 Hold, 0 Sell

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    Up: 19 | Down: 19 | New: 13
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Needham & Company downgraded Glu Mobile (NASDAQ: GLUU) from Strong Buy to Buy with a price target of $5.00 (from $8.00) following slightly better Q3 results but weak Q4 guidance.

The firm comments, "GLUU released 3Q results slightly better than the pre-announcement issued on October 9th, but management offered 4Q guidance considerably more negative than implied by earlier guidance. 3Q revenues rose 19% YoY to $21.2mm with smartphone revenues of $18.4mm—up 73% YoY (all figures are non-GAAP unless otherwise specified). GM expanded 850 bps to 89.5% of sales. Adjusted EBITDA was a loss of $2.1mm, better than initial guidance. EPS were a loss of $0.03 vs. a loss of $0.02 in 3Q’11. Management cited several reasons for cutting its 4Q outlook, including disappointing revenues from both older and newer titles, the decision to push five titles into 2013, and Apple's (AAPL, Wolf) more restrictive prohibition of incentivized advertising tactics. 4Q non-GAAP revenue is expected to be $19.5mm to $20.5mm (flat to down vs. 4Q’11) with smartphone revenues of $17.5mm and $18.5mm and an adjusted EBITDA loss of $4.0 to $3.1mm (previously "break-even or better")."

Needham & Company cut estimates for 2012, 2013 and 2014, with EPS estimates now set at a loss of $0.11 for ’12, a profit of $0.02 for ’13 and a profit of $0.30 for ’14, compared to their prior estimates of ($0.07), $0.12 and $0.40, respectively.

NOTE: This is today's third downgrade.

For an analyst ratings summary and ratings history on Glu Mobile click here. For more ratings news on Glu Mobile click here.

Shares of Glu Mobile closed at $3.26 yesterday.

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