This morning Glu Mobile dropped to $3.13 following Northland Securities cautious comments on Glu Mobile after having conversations with management. The analyst believes management is disappointed with Q3 game launches, which will likely limit smartphone revenue estimate upside.
This is puzzling to me because of the analyst price targets seen below from less than 1 week ago. Clearly Northland’s perception above was bearish but B. Riley’s perception following dinner was bullish?
Thursday October 4, 2012
Canaccord announced they expect Glu Mobile to meet Q3 guidance but does not expect much upside. The firm expects Q4 heavy launch schedule to result in a strong Q4, but sees a low likelihood the company will increase guidance. Shares are buy rated with a $7 price target.
Wednesday October 3, 2012
B. Riley said it has increased optimism in Glu Mobile’s long-term growth following a management dinner. Specifically, the analyst is positive on the management’s focus on game development and cycle. The firm would use recent weakness as a buying opportunity ahead of 2H 2012 results. Shares are buy rated with a $6.50 update.
So here is where I am at right now…
Now Monday I had a stop in just below $4 but remove all stops on stocks like GLUU for the first 30 minutes of every new trading day so I don’t get market order abused like I did on JRCC. Given there wasn’t any news on the wires this morning my early assumption was $4 stops fired and a bounce from $3.90 to $4 would provide my exit. Well within 10 minutes it had hit the $3.30’s and I’ve been assessing my strategy since.
What bothers me most right now is we’ve yet to hear from the company. Did they really issued reduced guidance through an analyst? They had a chance to reduce guidance when Zynga did and instead put out a PR reaffirming the earnings call date / time. So if they are not guiding down, then it would only make sense to reaffirm they are on track for the quarterly estimates. Nobody expected GLUU to be profitable here, so just on target should be enough to bring buyers back into this trade.
Technically Glu Mobile has only been this oversold on the chart 2 other times in the past 24 months and in both situations it proceeded to rally 54% and 106% just weeks after. Add in this week’s with Probability PLC for mobile gambling and I think there’s a lot of upside with shares of GLUU. I’m not one to take a swing trade and turn it into a long term trade just to avoid a loss, but after careful assessment I can’t justify selling my shares until $5 which is what I’ll hold out for as of right now. I’ll be spending the rest of today collecting data to support my decision further but needed to get this out asap.
I’ve been down big on trades before and come back green. I’m not happy about -26% here but unless I find research to support selling I am going to tough this out for as long as it takes and sell it for a profit down the road.