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GLU Mobile Revisited (NASDAQ: GLUU)

02/29/2016

GLUU Revisited

Summary:


Fresh investment from Chinese Internet concern Tencent Holdings, Ltd.
Strong sales growth
High profile deal with pop music superstar Taylor Swift
Impending launch of popular Chinese title in U.S.


In October, 2015, FST was pounding the table on shares of Glu Mobile (NASDAQ: GLUU),a leading global developer and publisher of free-to-play games for smartphone and tablet devices. The company already had a series of successful and original products in that huge marketplace, including titles like BLOOD & GLORY: IMMORTALS, DEER HUNTER, DINER DASH, and TAP SPORTS BASEBALL. The company also develops branded games such as KIM KARDASHIAN: HOLLYWOOD, ROBOCOP: THE OFFICIAL GAME, and HERCULES: THE OFFICIAL GAME.


At the time of that initial report, Glu Mobile had just inked a major contact for five years with Katy Perry and extended it's contract with the Kardashian Family including Kylie and Kendall Jenner That news followed in the wake of an even more significant development from a shareholder's standpoint. On April 29, 2015, after accumulating shares on the open market earlier in the year, Chinese Internet heavyweight Tencent Holdings Ltd. agreed to buy 14.6% of Glu Mobile Inc., for $126 million.
Tencent, which offers online games through its social-networking services in China, paid $6 a share for 21 million Glu Mobile shares in separate deals. Among other things, Tencent was most likely attracted to Glu's compounded annual growth rate over the past four years, which weighed in at almost 38%.



Last week, China's Tencent raised its stake in Glu Mobile to 21.5%, according to regulatory filings with the SEC. The company bought four million more shares of Glu, and announced that it will soon launch its top-grossing Asian-market mobile shooter game "WeFire" in the United States, to compete with the popular title and biggest rival, "Frontline Commando."
Celebrity Games Paying Off; Taylor Swift Game on Tap


In 2014, Glu doubled its sales largely due to the launch of Kim Kardashian: Hollywood, with the game accounting for about 31% of Glu's revenue during 2015. The company recently launched a Kylie and Kendall Jenner game, which quickly surged past the Kim Kardashian app and became the leading title in the U.S.-revalidating the company's focus on Hollywood name brands, leveraging the massive social media following of those stars.


Enter Taylor Swift, who is hands down the most iconic pure female pop singer in the world today. In early February Glu management announced an exclusive multiyear partnership with Swift for its next celebrity game. The game is expected to be out in the latter half of this year, but the company is being hush-hush about game details and development. Swift has 74 million Facebook followers, with her number of Instagram and Twitter fans not far behind. That's a lot of eyeballs-not to mention potential game buyers.


Conclusion
Glu remains a value stock with exciting growth potential. The increased ownership by, and collaboration with Tencent gives the company a doorway into the fast growing Chinese mobile game market-worth an estimated $2.9 billion in 2014, and expected to expand exponentially in the years ahead. Tencent recently purchased 3 million shares of GLUU in the open market bringing their ownership up to 21%
Glu's core business, led by the Kylie and Kendall Jenner and Kim Kardashian games, continues to generate a large portion of the total revenue of the company, and the Kardashian family remains one of the most popular celebrity franchises in the world. And despite the outsized success of the Kardashian apps, a new member of the Glu family, songstress Taylor Swift may give all of the K sisters a run for their money-with GLUU shareholders whistling all the way to the bank.