I just want to comment that the longs who rode the stock up bought at the $3 and $4 levels which is where the stock was a couple months ago. Some sold half their position at the top or on the way down prior to earnings. Those short on the stock are the ones who got hurt on the run up not the longs. The shorts who bought short at $6 and $7 have been rewarded recently as they now begin to cover. I just want to make sure we have our facts straight. Ignoring ups and downs... the valuation does not match what is likely for this stock.
Bull is talking top line revenue (as reported at Q end) not Net or Margins... his analysis is accurate.
ZNGA is booking $175M a quarter and GLUU is $85M+... ZNGA is bleeding and GLUU is growing revenues by leaps and bounds. ZNGA has no top 10 grossing games - GLUU has 1. ZNGA Market Cap is $2.5B and GLUU is $450M... at this point, I would expect GLUU to be AT LEAST half of ZNGA market cap based on the numbers and growth... which puts GLUU at the $12 to $15 level. Analyst are saying $8 to $10... we are at $5 now. I recommend a strong buy for GLUU here.
I think we see a slow rise to $7 a couple weeks before earnings are announced... (making a nice 3 month cup formation) then a sell off prior to earnings (handle) and then wave 3 begins after earnings report and it breaks through 52 week high in mid to late October when DH15 is released and KKH is confirmed isn't a flash...also Diner Dash...
This action is very typical and expected after a run like GLUU had. A couple points:
1) Elliott Wave is in play... you subtract the pps when the run started from the top and multiple by .618...this gives you the size of wave 2 (wave 1 being the initial run). Wave three is next. This is a common wave ratio throughout stocks... the stock selling is now exhausted and investors think that it's current level is attractive (golden ratio...the beauty of .618). $5.22 is .618.
2) Stops hit like chain reaction ...shorts know when it is over extended technically and they know when there are stops and margins in play.... Smart buyers know that shorts will do this and they let it happen in order to get more shares cheaper...sometimes they do it themselves.
3) Stock was $4 based on guidance...but really $5 as we know guidance was going to be beat and it was without KKH. Now they have a new franchise... a revenue source for years...increased their annual revenue by a 1/3rd ...they have an audience they can sell other like games too... - Does anyone REALLY believe that $5 is where this stock should be? That is why we rise to $6 range quickly...maybe $7 by QE. Then higher after Q3 reports.
4) CEI purchase... brilliant. Got it cheap based on run from KKH... diversify revenue even more now... proven revenue source and will increase profitability/margin. In addition, their "distribution" is much larger than CEI so 1+1=3 here. Win/Win.
5) There were gaps to fill down below 5.50...
Summary - Buy now and buy quickly while in the $5s.
With those numbers - which GLUU will beat because they always have for 17 quarters - its hard to believe this stock is a $440M market cap. It will bounce and bounce hard... this is clearly a test of the 50MA as well as the Elliott Wave dead on for wave 2... there has been a lot of accumulation (3x more than ever in volume) over thelast few weeks...this is a $1B company at this point.
True. A lot of margin selling. Remember, smart money sees the margin buying and will push it down knowing margin has to sell to get in at lower prices. This is a very good story and valuation is very attractive. No worries...just going through normal gyrations. Also...almost exactly down 61.8% from the difference between the beginning of the climb and the high... which is the natural movement for wave 2. I am on board for wave 3.
little mention of the fact that GLU Mobile picked up CIE for about a 1/3rd discount based on the stock part of the deal. The deal stated GLU will us stock to pay $70M - the stock was determined by average price over last 10 trading days ending July 29th. Without KKH (and when deal was finalized KKH was not released) CIE would have received 1/3 to 1/2 more stock than they did. This turned out very well for GLU and their share holders... I am sure CIE management was kicking themselves over those 10 days.
Just to be clear - I don't think "gave" is correctly stating what they did. They "purchased" assets of CIE which they will use to increase their revenue and Net. Cost was $100M. The question is whether with what they received will increase their "value" or "market cap" by $100M - the answer is that it will likely do this immediately but the plan is to grow the business using the GLU technology and synergy...1+1=3. These results will be evident early next year - to mid next year.
It will hurt short term PPS... however, they are building a very nice large company and have done well with their acquisitions in the past. Paying $100M for a 27 grossing game... also demonstrates GLUU is very under valued for what they have..
The video with Hoenig is a really good example why it is not worth listening to these guys for investment advice. All he talked about was the KKH game and its staying power...one hit wonder concern. If he had researched GLUU he would see that all their guidance for the year is made without the assumption of hits...they are the only Mobile game company that can say that. He would have also seen that KKH does have staying power - example their stupid TV show has been on for years... With some research he would have seen that KKH is another franchise for GLUU and that many games can spawn from this... that the user base is RICH for advertising...that is diversified GLUU who was a shooting adventure game company.
I happen to have followed GLU Mobile for a while and therefore can see through what he was saying...but there are many times these guys talk about stocks I don't follow and would have no idea if they were on target or not. Really in the end...they are very useless to the investor.
In the example of GLUU, $600M is the market cap and compared to fair valuation...that is low considering the future. GLUU might go down after earnings or it might not...but over six months perspective...this stock is clearly a buy here.
Good point - I stand corrected. Net is the impact on the royalties to KK. I think it is the revenue number that will stand out...makes it complicated. However, that puts my estimate above $180 for the year guidance... could be $190+ with this correction.
I think you are right on the positioning... they will say they are raising annual guidance based on their Q3 visibility but will shy from raising their previous Q4 until they see how things shake out. Lets say KKH does $45M in Q3...that is roughly $20M conservatively to GLUU and is added on top of their previous Q3 estimates. Dino/DH doing well do should make them feel comfortable with the $20M...although they may go conservative and only raise $15M. It is their style to not extend themselves - especially now when they have a couple quarters of success built in. I think $180M is benchmark. Real play on the stock will come in 13 weeks when they announce Q3 with a sound beat and raise Q4... with this in mind, buying on the dips would be prudent if it does dip.
I am going on record to say I think guidance will be raised to $180M for the year. Anything higher and stock will pop. Anything lower and stock will flat to slightly lower. I think it call comes down to this.
Question is what level of guidance... Q3 with KKH could be $80M quarter or higher...but will they play it conservative and say $60M? If they do...then what happens to the stock? I think you are correct that if you hold through earnings you need to be prepared to go the the 13 weeks as I think the ER for Q3 will be much higher than what they guide and that will be confirmation for the year and KKH. I really don't expect this management to provide any "real" guidance numbers here...they will guide higher that is for sure...but I think their guidance will be very conservative compared to what investors are thinking and will disappoint. We go flat to slightly down for a couple weeks. Q3 ER will be the one to shoot for...