Glu Mobile tumbles on lower-than-expected guidance and downgrades
Shares of Glu Mobile Inc. (Nasdaq: GLUU) are swooning today after the publisher of mobile games issued lower-than-expected guidance for the fourth quarter and 2008 in its third-quarter earnings press release after Thursday’s close; and was downgraded by a slew of investment banks.
For the full year of 2008, ending Dec. 31, 2008, the company said it now expects revenues to be between $80 million and $85 million, well below the consensus of $97.08 million nine analysts surveyed by Thomson were projecting.
Glu said it expects net income to be between $3.7 million and $6.3 million, or between $0.12 and $0.20 per diluted share, which excludes $1.2 million for amortization of intangibles and approximately $6.4 million of anticipated stock-based compensation. The new guidance range falls below the mean estimate of $0.15 per share 10 analysts on average were forecasting.
During the third quarter, the company said it experienced strong growth in North and South America and saw renewed growth in the Asia Pacific market, but said the growth in those regions was dulled down by slower growth in certain geographies in Europe.
Deutsche Bank analyst Jonathan Goldberg downgraded the small cap to “hold” from “buy,” based on a slowdown in the company’s European sales. In reference to the weakening sales in Europe, Goldberg writes, “this trend seems to be worsening and is a cause for concern … the magnitude of the short-fall will impact Glu for many quarters to come.”
Goldberg also said the company’s loss of Hasbro titles has created some holes in Glu’s line-up for next year and if this were the only issue, he would be less concerned. The analyst further noted that the company also indicated that the timing of title launches associated with Time Warner have been pushed back.
“This may just be an affect of the movie studio picking and choosing their schedule for the year, but it has the affect of heavily weighting the company’s results towards the back half of the year,” Goldberg wrote in a research note today.
On account of the lackluster outlook, Goldberg has lowered his target price to $8 from $16 per share and decreased his estimates. The analyst now projects earnings of breakeven $0.00 on revenues of $17 million for the forth quarter, down from $0.05 on revenues of $20 million. For fiscal 2008 Goldberg lowered his estimates to $0.14 on revenues of $82 million, from $0.43 on revenues of $108 million.
Despite, all the negative attention surrounding the forward guidance, the company delivered solid third-quarter earnings. For the three months ended Sept. 30, net income was approximately $0.96 million, or $0.03 per diluted share, excluding amortization of intangible assets of $550,000 and stock-based compensation charges of $1.2 million, and was above the net loss of $0.03 per shares ten analysts polled by Thomson on average were forecasting.
In the third quarter of 2006, the company clocked a net loss of $1.7 million, or $0.33 per basic share, which excludes amortization of intangible assets of $721,000, stock-based compensation charges of $443,000 and $998,000 related to the change in the fair value of preferred stock warrants.
Glu reported revenue of $16.7 million, an increase of 35% from the third quarter of 2006. Nine analysts surveyed by Thomson were on average projecting sales of $17.02 million.
Shares of Glu have been trading in the range of $6.95 and $14.80 for the past 52 weeks.
For the fourth quarter, ending Dec. 31, revenue is expected to be between $17.7 million and $18.2 million, below the consensus of 19.60 million eight analysts polled by Thomson on average were anticipating.
Net income/loss is expected to be between breakeven and a loss of $0.3 million, or $0.00 and a loss of $0.01 per basic share, which excludes $550,000 for amortization of intangibles and approximately $1.2 million of anticipated stock-based compensation.
During afternoon trading, GLUU shares are down 32.52%, or $3.38, to $7.03.
