Trade of the Day – GLU Mobile (GLUU)

On July 26, the shares of social online game maker ZYNGA (ZNGA) fell almost 40% as their earnings report disappointed investors.  To add to the disappointing earnings, a more traditional gaming company, Electronic Artists (EA) issued a lawsuit against Zynga.   EA accused Zynga of copying key elements of “The Sims Social” title, alleging that Zynga obtained confidential development information by hiring three of EA’s top employees.

So what does this have to do with Glu Mobile (GLUU), our trade of the day?  The weak earnings from Zynga caused investors to hit the panic button Glu mobile sparking a response from Glu management.  During the midday trade, Glu management pre-announced their earnings which calmed investors by highlighting some of the differences between GLUU and ZNGA.  “Glu’s strong year-over-year growth was powered by our mobile-focus, lack of dependence on Facebook web users, and strength in male-oriented games.” noted, CEO Niccolo de Masi.  In an interview, de Masi noted the growth focus as gamers move from traditional gaming into tablets and phones.  They are uniquely poised to take advantage of the continued mobile battle between Google, Amazon, and Apple.

From a long term investment standpoint, GLUU is well positioned to deliver great value to their shareholders.  So what entry price is ideal?  The $4 level is very interesting.  In the chart below we can see the strong technical breakout in late March.  This strong volume move above $4 has been challenged several times with strong volume buying entering the stock each time.  Given the overbought nature of the stock market, lingering effects from ZNGA, and technical base of $4 on the chart, I suspect GLUU gets a bit cheaper in the short term.  Looking to buy in the $4.00-4.10 level offers strong value for both long and short term investors in a company uniquely poised to take advantage of the mobile and tablet craze.

 

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Posted on August 9, 2012, in Trade and tagged , , , , , . Bookmark the permalink. Leave a comment.

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