Glu Mobile Has a Winner

 | Oct 11, 2013 | 9:19 AM EDT  | Comments
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Glu Mobile (GLUU) has been a chronic disappointer as a stock. It's been public since 2007 and still trades well below its IPO price, which was in the teens.

Over the last few years, it's had a problem developing new hit games and making money on the ones that were hits.

If you are a game publisher, you're only as good as your last hit game, and Glu has seemed to have a neverending string of problems producing winners.

As a result, the stock has bounced around this year between $2 and $3, even though the market has done really well. Just a few weeks ago, the stock was touching $2 again.

But Glu's fortunes have turned around with the September release of "Deer Hunter 2014."

The stock has quickly jumped to the top of the charts on iPhone and Android, not only in the United States, but Canada and Australia.

The game has basically gone to the top of the freemium charts since its launch and has steadily stayed in the top three.

This morning, the game is No. 1 on the U.S. iPhone and iPad charts, according to AppAnnie. It's No. 5 on Android, but has been the top new game there for a while.

As a general rule, the longer any game is at the top on a freemium chart, the more money that publisher makes.

How much?

Well, it's rumored that private company Supercell's "Clash of the Clans" grosses something like $2.5 million a day. A decent top-10-type game will make on the order of $200,000 a day. There's obviously a big delta in between.

A key question for Glu's future stock price is how well they're monetizing "Deer Hunter." If they're just doing $200,000 a day and they keep that up for a quarter, that's $18 million right there. That's around the revenue number Wall Street is expecting for its third quarter (when "Deer Hunter" was only available for a couple of weeks). So, even that amount would end up being a huge contribution to its fourth-quarter results.

The other key question is can the game sustain its popularity? So far, so good. But there's no guarantee it can keep this up for another month or three months.

The game -- as you'd imagine -- is about killing deer and other game. It does a good job of forcing you to buy new guns to help your future hunts. It also is referring you to other games in the Glu library, hoping that they steer some of that hot traffic into their other properties and get folks hooked there.

In a couple of weeks, we'll hear from Glu management on their Q3 results and guidance for the fourth quarter. It matters less about what they did over the summer and more about what they say about how well "Deer Hunter" is bringing in money.

With each day that "Deer Hunter" stays at the top of the charts though, I continue to add to my position as I suspect there will be a real contribution to fourth-quarter guidance.

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