Last Minute Thought: Buy or Sell Glu Mobile Stock Before Earnings?

It has been a good year so far for games developer Glu Mobile (GLUU). With COVID-19 winds blowing at its back, the stock has appreciated by 62% year-to-date.

The mobile gaming specialist reported solid Q1 results in May and ahead of the second quarter’s results after the market close today, Wedbush analyst Michael Pachter expects the good times to continue.

Pachter is calling for bookings of $170 million and adjusted EBITDA of $15.5 million, above the Street’s expectation for $165.5 million and $14.1 million, respectively. The 4-star analyst’s forecast is also above Glu’s guidance of $162.5 to 167.5 million for bookings and EBITDA of $12 to 15 million.

Pachter’s estimates are telling, as in May, Glu already boosted Q2 guidance ranges by $12.5 million (bookings) and $7 – 8 million (EBITDA), based on the growth of its portfolio with record quarters in line for games Design Home and Covet Fashion and a 27% year-over-year uptick in bookings for Tap Sports Baseball (between April 1 – May 25).

So, basically Pachter is expecting better results than even Glu’s revised estimates. Why the bullish call?

Pachter explained, “A history of conservatism combined with shelter-in-place and growing anticipation for the baseball season give us confidence in additional top-line upside and profit flow-through relative to revised guidance to the tune of at least $5 million and $2 million.”

Add into the mix last week’s big 2Q20 results for peer SciPlay, and Pachter is convinced Glu can also deliver.

Looking ahead, the analyst counts the “ongoing boost from shelter-in-place, elevated organic app installs and the start of baseball season,” as “sources of upward pressure on the FY:20 outlook.”

Pachter also believes Glu’s conservative outlook for the rest of the year is likely to increase, and noted, “Implied 2H:20 bookings guidance represents a sequential step-down of roughly $35 million, seemingly leaving the door open for the full year outlook to increase by that amount or more. We would not be surprised by a significant increase to the full year EBITDA outlook, $15 million or more, but user acquisition spending plans are difficult to predict.”

Accordingly, Pachter rates GLUU an Outperform (i.e. Buy) along with a $11.5 price target, which implies about 17% upside from current levels. (To watch Pachter’s track record, click here)

Most of Pachter’s colleagues agree. Based on 8 Buys, and 1 Hold and Sell each, the game developer has a Moderate Buy consensus rating. All in all, the analysts expect shares to appreciate by 9%, as indicated by the $10.73 average price target. (See Glu Mobile stock analysis on TipRanks)

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Marty Shtrubel
Marty Shtrubel was born in the UK, raised in Israel, and then headed back to London, where he made music and pursued a career in sound recording. After a move back to Tel Aviv, he set off on a new path and now works as a financial blogger at TipRanks.

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