Glu Mobile Inc. (NASDAQ:GLUU) just released its latest third-quarter results and things are looking bullish. Revenues and losses per share were both better than expected, with revenues of US$120m leading estimates by 8.5%. Losses were smaller than analysts expected, coming in at US$0.03 per share. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see whether the latest forecasts would suggest a change of heart on the company. We’ve gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the latest consensus from Glu Mobile’s five analysts is for revenues of US$449m in 2020, which would reflect a meaningful 14% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Glu Mobile forecast to report a profit of US$0.22 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of US$470m and earnings per share (EPS) of US$0.25 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.
Analysts made no major changes to their price target of US$7.84, suggesting the downgrades are not expected to have a long-term impact on Glu Mobile’s valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Glu Mobile analyst has a price target of US$9.00 per share, while the most pessimistic values it at US$6.50. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Next year brings more of the same, according to analysts, with revenue forecast to grow 14%, in line with its 13% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the are forecast to see their revenues grow 11% per year. So although Glu Mobile is expected to maintain its revenue growth rate, it’s only growing at about the rate of the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Analysts also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Glu Mobile analysts – going out to 2021, and you can see them free on our platform here.
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