In Search of Millennial Melt-ups: Glu Mobile

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Do you play MLB Tap Sports Baseball 2018 on your mobile device? How about Design Home?

Both are published by this week’s “millennial melt-up” stocks: Glu Mobile (GLUU).

Remember this is a series that started on Market Insights in June after a reader asked for companies that might appeal to younger investors. The stocks had to trade for less than $10 and be recognizable for millennials without a ton of market experience. TradeStation’s Scanner tool was used to find earlier candidates, which included GoPro (GPRO), Fitbit (FIT) and Sprint (S).

GLUU’s the only one on our list with a market cap under $1 billion. Like the others, it’s a potential turnaround story after consolidating developers in San Francisco and Hyderabad, India. That helped fatten the operating margin from 56.1 percent to 62.3 percent between the first quarters of 2017 and 2018. Revenue and bookings spiked and its loss shrank by about two-thirds. The result? Management had the confidence to raise guidance on May 1.

Shares exploded higher on the news, but have now pulled back to the same 30-day moving average where they bounced a month ago. That could give investors an opportunity to enter with less than a month until the next quarterly report.

Two more considerations potentially stand out in GLUU. First, it’s something of a “value story” because it trades for less than three times revenue — even though it’s growing at a 40-50 percent clip. Meanwhile slower growing names like Activision Blizzard (ATVI) and Electronic Arts (EA) have an 8x multiple. Zynga (ZNGA) is valued at four times revenue.

Second, speaking of growth, GLUU predicted at a conference on June 11 that mobile gaming will be a $65 billion market by the start of next decade. Management said the increase will result from both organic growth and market-share gains at the expense of traditional PC and console games.

In conclusion, this isn’t a trade recommendation and everyone needs to do their own homework. But GLUU may offer both growth and value at current levels.

Glu Mobile (GLUU) chart with 30-day moving average.
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.