Many people seemed to have shifted into panic mode over Glu Mobile (GLUU) the last few weeks as the stock has fallen around 30% from recent highs. Was it not less than three months ago that everyone was celebrating a single-day jump of 25%? This stock is prone to big movements, that’s one of the reasons you own it, right? If you liked the company three months ago, nothing with the company has changed. The primary reasons for the drop are threefold, in our opinion:
1. The King Digital Entertainment (KING) IPO was highly touted and highly disappointing. Many took this as a bellwether for mobile gaming stocks as a whole. In truth, it was more a reflection of people not wanting to get burned on a one-hit wonder like many did on Zynga (ZNGA) at its IPO.
2. The Russell and most small caps have been hit really hard over the last few months, it can only be expected that GLUU is going to get taken down with the rest.
3. GLUU just had a one day jump of 25% in February that continued into a month-long climb of over 37% to new all-time highs. It’s not too unusual for a performance like that to be followed by a notable pullback.
When you put all three of these together, the recent 30% decline doesn’t look quite as scary. All the same, it has been a bit painful. As we said, the company prospects are as good or better now than three months ago. Of course there are no guarantees, GLUU could end up a one-hit wonder, but they don’t seem like that kind of a company to us. If you liked GLUU in February, stand strong and don’t let last few weeks shake you out.
For a closer look at GLUU’s numbers, please see Glu Mobile’s Bright Future.
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