Glu Mobile: A Stock for Traders, not Investors
When I first started out as a financial blogger, I was very bullish on the prospects of mobile gaming industry and companies that make mobile games. And Glu Mobile (GLUU) was my favorite pick from the mobile gaming industry.
My initial buy recommendations were successful as Glu Mobile soared on the back of stunning quarterly results and strong product pipeline. However, after studying a bit more about the mobile gaming industry, I changed my stance on Glu Mobile in July 2014 and advised investors to book profit.
Although I am still bullish on the mobile gaming industry as a whole, I have realized that it is impossible for a single company to dominate the sector.
Absence of consistency
According to VentureBeat, the mobile gaming industry is estimated to grow to $45 billion in valuation by 2018, dwarfing the growth of console gaming and online gaming.
While I have no doubts that the mobile gaming industry will grow significantly in the coming years, I will not recommend long-term investors to buy Glu Mobile. As I already said, I think it’s impossible for any single company to dominate the sector, and all the popular companies in the sector only enjoy cyclical success.
As opposed to consoles and PC, playing games on smartphones is very complicated due to the small screen and unavailability of buttons. Smartphones offer limited functionality and therefore developing a popular game is very difficult. Advertising can be of help, but the success of a new game almost entirely depends on the concept of the game. And coming up with new concepts consistently has proven to be impossible for every company.
This is evident by the fact that no company has been able to consistently develop games that have gone viral. As a result, companies like Zynga, Glu, Rovio, and Imangi Studios have all enjoyed cyclical success but have never had consistent success. All of the aforementioned companies have had a few hit titles. But, they have struggled to come up with new titles. Instead, the companies try to milk their previous titles by launching sequels with minor upgrades.
Clearly, no company has managed to enjoy long-term success, which is why I think Glu Mobile is not a stock for long-term investors.