Glu Mobile shares surged today following the game maker’s analyst day, optimistic commentary from management and a positive report from analysts at Canaccord Genuity. The stock climbed as much as 4.33% to $6.75 per share following a big endorsement from reality TV star Kim Kardashian.
Kim Kardashian’s successful partnership with Glu
In a report dated May 15, analysts Michael Graham and Austin Moldow provided the highlights of Glu Mobile’s analyst day and explained why they upped their price target from $8 to $9 per share. They also maintained their Buy rating on the stock.
Canyon Profits On Covid Crisis Refinancings
Canyon Partners' Canyon Balanced Funds returned -0.91% in October, net of fees and expenses, bringing the year-to-date return to -13.01%. However, according to a copy of the firm's investor correspondence, which ValueWalk has been able to review, the fund quickly bounced back in November, adding 7.3% for the month. Net of fees, the letter reported, Read More
Kardashian actually took part in Glu’s analyst day, taking the stage to talk about how her partnership with the game maker helped her monetize her fan base. Glu has enjoyed immense success with its game Kim Kardashian: Hollywood and is now using the same game engine for other games. This is good news because the company should be able to replicate the success it found with the Kim Kardashian game using other celebrities.
Glu has already updated the Kardashian game by adding more members of her family to further build on the success of that game. Additionally, the company announced a partnership with Kylie and Kendall Jenner for a similar game, which is scheduled to be released in the fourth quarter. Recently Glu also signed Britney Spears and Katy Perry for long-term deals. All these deals demonstrate how the company is able to capitalize on the popularity of celebrities through its offerings.
Glu’s profitability to continue
At Glu Mobile’s analyst day, management updated its bookings growth expectation for next year. They now expect at least 20% year over year growth and potentially as high as 30% over the next several years.
Management is targeting between $1.3 billion and $1.7 billion in bookings in 2020, with about $700 million from core games and about $800 million from celebrity games. They also project an EBITDA margin of 25% in 2020 because they’re keeping the cost of user acquisition low and controlling spending on research and development through the reusing of game engines like the one they use for the celebrity games.
The Canaccord Genuity team upped their bookings estimate for next year from $296 million to $326 million and their EBITDA estimate for 2016 from $44 million to $49 million.
Glu’s product pipeline
Glu Mobilealso highlighted some of the games that are currently in the pipeline. Last year Kim Kardashian and Deer Hunter 2014 made up more than half of Glu’s bookings, but this year, the two games are expected to only account for 28%. This is an important development because it demonstrates how the game maker is diversifying its portfolio to avoid the trap Zynga and so many other game makers fall into, which is relying too much on bookings or sales of one or two hit games.
For this year, the company expects to release 16 new games. Only three of them have been launched so far, and two more are expected before the end of the current quarter. Eleven games are expected in the second half of this year, including the Katy Perry game. The Canaccord Genuity team noted that four of the game maker’s teams aren’t launching anything this year, which they say should mean next year will start off with a continuation of this year’s momentum.
More social gaming features
The company is also focusing on incorporating more social gaming elements into its franchises, according to Graham and Moldow. The recent trend of social gaming has demonstrated that audiences tend to be more engaged with social games and bring a “higher payer lifetime value,” according to the analysts.
Further, the content pipeline becomes cheaper because the communities become the content of the games, thus benefiting their developers and making it easier to roll out new features for the games.