Glu Mobile Inc. (NASDAQ:GLUU) reported solid earnings results last night, but solid results weren’t enough to please Wall Street. As a result, analysts at Canaccord Genuity cut their price target for the mobile game maker, although they don’t think the results are as bad as some seem to think.
In a report dated Oct. 29, 2014, analysts Michael Graham, Maria Ripps and Austin Moldow said they think investors were disappointed that Glu didn’t raise guidance for next year. However, they were “encouraged” by management’s comments about what they expect for next year.
They think the beginning outlook for 2015 is “quite reasonable” and that Glu Mobile will “add materially” to management’s guidance by making acquisitions.
The good in Glu Mobile’s earnings report
The Canaccord Genuity team noted that Glu’s Kim Kardashian game brought in $480,000 in average daily bookings. The game seems to be remaining strong, as guidance implied a $280,000 daily run rate.
In addition, they said Glu management implied modest growth in 2015 against difficult comparisons for this year, which includes the launches of both the Kim Kardashian game and the Deer Hunter 2014 game.
The analysts also say that Glu Mobile looks to have a solid launch schedule for 2015, which includes the following games: Terminator, James Bond, Contract Killer Blood & Glory Immortals, Frontline Commando WWII, a Diner Dash sequel, a new celebrity or stardom franchise, Racing Rivals PVP, Car Town, a football game and Deer Hunter 2016.
They think that this solid slate of upcoming titles makes management’s guidance for 2015 look a little conservative. Additionally, they said investors should expect Glu Mobile to make some acquisitions in 2015, as they believe management plans to grow more quickly than the organic guidance suggests. They expect “a good number of small acquisitions” in 2015.
The bad in Glu Mobile’s earnings report
On the negative side, the Canaccord Genuity team said there wasn’t much upside to third quarter bookings, which could suggest a noticeable decline in bookings for Kim Kardashian. Also management did not increase guidance for the fourth quarter.
The analysts maintained their Buy rating but cut their price target for Glu Mobile from $8 to $6 per share. The reduction was due to a lowering of their multiple, which they cut from 2.7 times to 2.5 times based on lower revenue growth.
