If you’re looking to start investing in technology, don’t be thrown off by Glu Mobile’s net loss tripling in the first quarter of 2017. Glu Mobile (NASDAQ:$GLUU), a mobile game developer, had a net loss of $0.15 per share, which was more than twice what Wall Street had predicted ($0.07 per share loss). With that said, investors should remain optimistic about the Glu stock as there was a massive increase in their bookings guidance for the year.
A boost in bookings guidance means more income.
Even though business has struggled as of late, Glu Mobile’s stock prices have shot up. This is a plus for anyone looking to start investing in technology. Glu Mobile has focused on developing platform-centric games, which has brought in the results that they need. Their first-quarter bookings were at $69 million, which is higher than its $54 million guidance. If that wasn’t enough to convince you that Glu Mobile could turn around in 2017, know that this mobile gaming company increased its booking guidance for 2017 of $280 million to $290 million. This is a major jump from last year’s guidance range of $215 million to $225 million.
As mentioned, bookings guidance indicates stronger revenue, but it also indicates that this mobile gaming company has gotten more commitment from customers for in-app purchases. All in all, more commitment from customers will lead to increased revenue. If you want to make a technology investment with Glu Mobile, look at both the company’s revenue and their bookings guidance as they mirror one another. By doing so, investors can get a general idea on how Glu Mobile’s top line might look as the year goes on. Essentially, if Glu Mobile manages to convert roughly 90% of its annual bookings into profit like it did in 2016, then in 2017, it’s top line could grow more than 20%.
Glu customers spend more money.
Despite Glu Mobile’s monthly active user (MAU) count dropping over 22% from the 2016 period to 32.8 million, the average bookings per monthly active user have increased almost 67%. This jump is mostly due to Glu Mobile wanting to develop games with longer staying power rather than benefiting from short-term social media trends.
One popular example of this would be Glu capitalizing on Kim Kardashian’s popularity in 2014 with her game Kim Kardashian Hollywood. In the first 18 months following the launch of the game, it made $100 million. Like anything, however, all good things come to an end, and the game died down with only $33 million in 2016 sales.
As a result, Glu now wants to focus on developing consistent revenue streams. According to Glu, they want to create “repeatable, predictable revenue that stacks year over year” and they are doing so by building platform type games. Glu now updates its already existing games and adds better graphics and more advanced gameplay as it encourages more in-app purchases. These platform type games are why there has been such a jump in spending by users.
Bookings are higher due to “evergreen” games.
It’s important to note that Glu Mobile’s portfolio is split into 3 sections: growth games, evergreen games, and legacy games. Currently, there are 80 legacy titles which remain on autopilot as they create profit without having to have regular updates. The 60 evergreen games, on the other hand, are updated regularly. These games are refurbished with new content as this will make sure that there is a large user base that will generate long-term income.
The good news is that this strategy is working for Glu Mobile (and for Kim Kardashian). The Kim Kardashian Hollywood games bookings remained flat throughout the first quarter of 2017. This was the first time that this games booking did not fall.
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