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Why Glu Mobile Stock Plummeted 27.1% in May

Keith Noonan, The Motley Fool

What happened

Shares of Glu Mobile (NASDAQ: GLUU) fell 27.1% in May, according to data from S&P Global Market Intelligence. The video game company's stock saw a steep decline following the business' first-quarter results, and it continued to trend lower as the month went on amid sell-offs for the broader market.

GLUU Chart

GLUU data by YCharts.

Glu reported first-quarter earnings on May 6, delivering mixed results and guidance that left investors underwhelmed. The company broke even on $95.9 million in sales (up 18% versus the prior-year quarter), and breezed past the average analyst estimate for revenue of $89.75 million. Bookings for Q1 came in better than anticipated as well -- rising roughly 7% year over year to reach $92.6 million. However, the average analyst estimate had called for a per-share profit of $0.05, and bookings guidance for the second quarter also fell short of expectations.

A person using a mobile phone.

Image source: Getty Images.

So what

For the second quarter, the company expects to post bookings between $100 million and $102 million -- short of the analyst call for bookings of $107 million that was in place before the recent earnings release. The earnings miss in the first quarter, combined with a miss on guidance and sell-offs for the broader market, was enough to send the company's valuation tumbling last month -- even as it raised its full-year bookings guidance to between $445 million and $455 million and topped the average analyst target for annual sales of $446 million. June has yet to bring much in the way of relief for shareholders. 

Now what

Glu Mobile stock has continued to lose ground this month, with shares trading down roughly 9% across the stretch. 

GLUU Chart

GLUU data by YCharts.

Following the mixed quarterly results and guidance, one of Glu's biggest shareholders took some profits on the stock. Tencent unloaded a quarter of its Glu stock on the open market on May 31, selling 7.26 million shares of its stake for a haul of roughly $56 million. Tencent still owns a roughly 14.5% stake in Glu, but the sale does look a bit more conspicuous on the heels of the smaller game company's weaker-than-expected quarterly earnings. Some investors seem to have followed Tencent's move after the sale was disclosed in a Securities and Exchange Commission filing on June 4.

Glu shares trade at roughly 20.5 times this year's expected earnings. 

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.