Mobile gaming app publisher Glu Mobile (NASDAQ: GLUU)
shares surpassed its pre-COVID-19 levels to nearly reach 52-week highs while the S&P 500 (NYSEARCA: SPY)
only managed to recover half its losses. Glu Mobile has been a clear benefactor of the COVID-19 pandemic as stay-at-home orders helped surge mobile and console gaming activities. As cities phase in restart initiatives and workers return to offices, mobile gaming activity and stock prices should see a reversion from peak levels. Investors may want to take advantage of the elevated price levels above the Feb. 19th
pricing, at the beginning of the coronavirus market collapse. The rifle charts provide the potential price trajectory levels towards the nominal reversion pricing.
Q1 2020 Earnings Results
On May 7th, Glu Mobile reported Q1 2020 earnings for a loss of (-$0.06)-per share missing consensus analyst estimate of $0.00 on revenues of $107.3 million, up 11.9% YoY. Q1 bookings grew 15% YoY with boost in daily active users (DAU) and increased engagements across the board. Glu highlighted the surge in traffic at the end of Q1 and proactively updated bookings guidance for Q2 2020 to $150 to $155 million and FY2020 to $490 to $500 million. The Company launched Disney’s Sorcerer’s Arena (NYSE: DIS) and Tap Sports Baseball 2020 in March to directly benefit from the work from home environment. The Tap Sports and Covet Fashion franchises saw its highest Q1 bookings in history, at $15.2 million and $17.1 million. In game advertisements made up 11% of total bookings and $114.7 million was the company’s cash balance at the end of March. The Company extended the licensing deal with Kim Kardashian through 2023.
Glu management Is aware of the inevitable drop in traffic and DAUs with regional restarts and plans on additional marketing initiatives after shelter-in-place mandates are lifted. They did note the lower CPI levels from Facebook (NASDAQ: FB) were offset by higher engagement due to shelter-in-place mandates. Ad revenues were flat. The Company bolstered marketing spend to $35.6 million or 33.5% of bookings compared to $23 million YoY. Net loss on a GAAP basis was (-$8.3 million) for Q1 2020. However, Glu management feels positive trends can continue. The Originals interactive story platform title still needs to significantly increase D30 retention and elder monetization. They are still on the hunt for more acquisitions to accelerate growth and profitability and plans to extend Design Home and Taps Sports Baseball to PC web browsers to broaden audience reach and accessibility. The Company missed EPS estimates by (-$0.06)-per share despite bolstering marketing spend. While Q2 2020 top line growth should spike, the losses will continue in the ‘best it gets’ pandemic backdrop aided by shelter-in-place mandates that will unquestionably be lifted. Therefore, the reversion is also inevitable, and investors should consider locking in profits before gravity sets in. The same applies to competitor Zynga (NASDAQ: ZNGA) , which at least has potential for upside if the online poker ban ever gets repealed.
Opportunistic Entry Levels
Using the rifle charts on a weekly time frame provides a broader view of the landscape for GLUU stock. The weekly market structure low (MSL) buy triggered above $4.85 powered by the weekly stochastic mini pup which then triggered the daily MSL buy trigger above $5.31. The daily has a make or break set-up which could drive shares up to the $10.45-$10.68 Fibonacci (fib) level. However, the weekly market structure high (MSH) sell triggered under $9.67 with a daily MSH trigger under $9.22, which could set up the daily mini inverse pup down towards the $8.67 super fib. A coil off that level will retest the daily 5-period moving average (MA) for a final test. If the bounce rejects back down off the 5-period MA, that would be the proverbial ‘nail in the coffin’ as the nominal sell-off area is the $7.34 fib overlapping with the monthly 5-period MA. A bounce off there is inevitable, but a rejection and breakdown sets up a beeline downside flush towards the $6.27 super fib and lastly the $5.31 daily MSL trigger support level. Nimble traders can use these fib levels to scalp bounce reversions utilizing intraday time frames. Investors can use the bounces to unwind positions if they missed the opportunity to do so above the $9.22 daily MSH sell trigger.
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