Glu undoubtedly is going announce blow out results on the success of KKH and probably from other games such as TSB. But the PPS may not go as much as it might have just a few months back. King and Znga have muddied the waters. What people don't realize is that the Glu has the best mgmt team among the mobile gaming companies.
The three musketeers (de Masi, Ludwig and Akhavan) seems to have made identifying, acquiring other gaming companies and tuning, marketing and monetizing their games into a science. while they know it is impossible to figure out in advance if a game is going to be a major hit, they seem to have figured out ways to monetize even moderate games very well. They also seem to be getting in tune with the mobile gamers as more of their games seem to be hitting the top ten downloads.
I see the beginnings of a mobile gaming giant here. All the cashflow from KKH will be put into good use by acquiring more companies which they might have already identified. This positive cycle will result in a large number of gaming franchises each with multiple years of life. This is where King and Znga seem to have stumbled with King even trying to return some of the money back.
TSB is in top ten (don't know for how long) next up is Diner Dash ... whats needed is patience.
It's hard to ignore the Glu Management Team when each quarter for the last 18 quarters in a row has been better than the last. And all those quarters are coming together for an impressive cc in October/November.
"...they seem to have figured out ways to monetize even moderate games very well."
The problem is that even with the success of moderate games, it doesn't move the needle in terms of net income. They are still in need of the rare blockbuster like KKH to move the needle. KKH has put tens of millions of dollars into their coffers. You can't say that about all their moderate games combined. When KKH fizzles out, they are back to square one until they stumble accross the next blockbuster. Their operating income will always be lumpy, which will make this stock extremely volatile. The next two quarters will look great in terms of net income. But the market is looking beyond that. It is KKH that is keeping this stock above $5. Without KKH, this is a $3.50 stock. Same valuation as the last secondary offering, which incorprated the value of all their moderate games + Deer Hunter.
The reason why GLUU is at $5+ and not $9+ is because of a big short seller and weak retail longs. Many retail longs are used to GLUU wash, rinse, and repeat cycles for the past 6 quarters so they are playing the same game. But, what they don't realize is that GLUU is moving from mediocre to good category in terms of putting out solid games to generate revenue.
GLUU is still cheap when you look at the revenues and price to revenue ratios. Earnings will come and will come fast when they start putting the newly found revenues to good use. They don't have good company (ZNGA and KING) to take the sector up but it is doing well on it's own and competitors losing market share to GLUU is a great thing for GLUU. GLUU has many potentilly strong games in the pipeline including James Bond. I am sure that they will have Tap Sports Football and Tap Sports Hockey in the pipeline.
If you don't have patience to hang on to this for a month, go trade other stocks and come back but this is a company on the move and I will be holding it as long as they show the growth I am seeing now. Shorts will be bashing and retail longs who sold just before the earnings will be bashing but they will come back and go long a month before next earnings and GLUU will test a new high.
I like what I see and will be adding on Monday. Have a good weekend!