Glu Mobile Inc. (NASDAQ:GLUU) has new game launches scheduled for 2021, which could accelerate bookings growth, and margins are likely to expand as its portfolio scales, according to Goldman Sachs.
The Glu Mobile Analyst: Michael Ng initiated coverage of Glu Mobile with a Buy rating and a 12-month target price of $9.80.
The Glu Mobile Thesis: The company’s Growth Games comprised 79% of total bookings in 2019 and are likely to grow by 16% in 2020, driven by stay-at-home measures, Ng said in the note.
He added, however, that engagement is likely to normalize over the next 12 months, resulting in a slight decline in Growth Games in 2021, before bookings return to low-single-digit growth in 2022.
Glu Mobile has several new games in its pipeline for a 2021 launch, including "Deer Hunter World: The Hunt," "Tap Sports Fishing" and "P3." Although the contribution from these could be negligible in 2021, the analyst said their bookings in 2022 are estimated at $90 million.
Meanwhile, the company is likely to “continue executing tuck-in M&A to grow its portfolio of games,” Ng wrote. Glu Mobile should achieve margin expansion as its portfolio scales and it can close the gap with Zynga Inc (NASDAQ:ZNGA) “if it is able to achieve a similar level of scale for its mobile games."
GLUU Price Action: Shares of Glu Mobile were trading around $8.04 at the time of publication.