Glu Mobile Buy Target Price $ 5

GLUU : NASDAQ : US$4.05
BUY 
Target: US$5.00

COMPANY DESCRIPTION:
Based out of San Francisco, California, Glu Mobile is a
leading developer of mobile games. The company is
primarily focused on developing original-IP freemium
games for smartphones and tablets. Glu Mobile also
operates a third party game publishing platform.

Technology — Internet
DH14 POINTS TO STRONG Q4;
EXPECT PRUDENT GUIDANCE
Investment recommendation
Glu stock has nearly doubled over the past four months, despite a 20%
mid-course correction after Q4 guidance underwhelmed the most bullish
investors. We are somewhat cautious of another post-earnings
“conservative guidance” letdown, and revenue is a great deal more
concentrated in one game than we would like. However, with the
blockbuster performance of DH14 followed by the solid early success of
EW3 and Robocop, we believe Glu is making continued progress toward
building a platform capable of producing money-making games on a
consistent basis.
Investment highlights
 Deer Hunter 2014 performance has stayed strong during the
quarter and should handily outperform targets for Q4. Other
existing games showed encouraging stability, and new launches
EW3 and RoboCop are showing early success.
 We believe management is likely to prudently reiterate its 15-20%
growth outlook for 2014. We also expect commentary around
EBITDA expectations. We are currently modeling a 2.7% adjusted
EBITDA margin for 2014 and believe this should be achievable.
Valuation
We believe consistency deserves a higher multiple and are raising our
price target to $5.00 (from $4.25). Our new target is based on 3x (up
from 2.5x) our 2014 revenue estimate.

 

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