Mobile gaming is projected to account for roughly half of the $160 billion global video game market in 2020, and Glu Mobile (NASDAQ:GLUU) GLUU is set to benefit from its continued growth. Glu easily topped our third quarter estimates and its stock price has surged over 35% since its November 5 release.
Always on Our Phones…
Glu’s portfolio of mobile games features Deer Hunter, Kim Kardashian: Hollywood, MLB Tap Sports Baseball, Disney Sorcerer’s Arena DIS, and other titles such as WWE Universe and Design Home. The company continues to diversify and expand its offerings in a world where hundreds of millions of people have smartphones and tablets—and plenty of people are on their phones nearly non-stop.
Glu’s third quarter revenue soared by 48% to a company record of $159 million, with bookings up 22%. The firm also beat our bottom line estimate by nearly 60% and it increased its cash position, which might help it make some strategic acquisitions down the road. “We announced the title and genre of our new Crowdstar game, Table & Taste, which will serve the culinary category and complement our Crowdstar brand perfectly with a larger and more diverse addressable user base,” CEO Nick Earl said in prepared remarks.
“Looking ahead, our continued expected growth, future game launches, and strategic initiatives give us confidence as we enter 2021 with significant, positive momentum.”
The overall global gaming industry is expected to climb from $160 billion in 2020 to over $200 billion by 2023. Investors should note that mobile gaming is projected to account for roughly 50% of the market this year vs. the console space’s 28% and PC’s 25%.
With this in mind, our current Zacks estimates call for Glu’s fiscal 2020 sales to climb over 31% to reach $556 million. This would beat last year’s 12% sales growth and compare favorably to FY18’s 28% top-line expansion. Glu is then projected to follow up its FY20 showing with 11% higher sales in FY21.
At the bottom end of the income statement, the mobile gaming firm’s adjusted earnings are expected to skyrocket 141% to reach $0.41 a share, with FY21 set to climb another 34% higher. And the nearby chart highlights Glu’s strong earnings revision activity.
Glu’s impressive post-release earnings revisions help it hold a Zacks Rank #1 (Strong Buy) at the moment. GLUU also earns an “A” grade for Growth and a “B” for Momentum in our Styles Scores system.
Meanwhile, the stock trades at a solid discount to its highly-ranked industry’s average in terms of forward sales at 2.7X vs. 5.4X. This discounted valuation comes despite the fact that Glu shares have crushed the Toys-Games-Hobbies space, which includes everyone from Activision Blizzard (NASDAQ:ATVI) ATVI to Mattel (NASDAQ:MAT) MAT, in both 2020 and over the past three years.
GLUU has surged 35% since its Q3 earnings release. More broadly, its shares have climbed 120% in the past three years, including some big ups and downs. The stock closed regular trading on Monday at $9.53 a share. This gives it about 12% more room to climb before it would hit its 52-week highs.
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