Glu Mobile Breaks Down to Key Support After Earnings

Surprise Loss and Lower Bookings Send Shares Lower

Glu Mobile Inc. (GLUU) shares moved sharply lower on Tuesday after the company reported a surprise net loss and lower-than-expected bookings guidance for next quarter. Revenue rose 19.2% to $95.6 million, barely missing consensus estimates by $530,000, but the company's net loss of one cent per share fell short of consensus estimates calling for a profit of two cents per share.

Glu Mobile said that it expects bookings during the first quarter to come in between $88 million and $90 million, which is lower than the $98.2 million during the fourth quarter. The company raised full-year booking guidance to $435 million to $445 million to reflect partial contributions from current beta titles but no contribution from a title from The Walt Disney Company (DIS) entering beta during the first quarter.

Despite the lackluster results and guidance, Cowen & Co. believes that the bullish thesis for the gaming company remains intact. The analyst firm suggested that 2019 guidance was conservative given the nominal performance assumptions for Glu Mobile's new game launches. The firm reiterated its Outperform rating and price target of $11.00 per share, which represents a 22% premium to the current market price.

Technical chart showing the share price performance of Glu Mobile Inc. (GLUU)

From a technical standpoint, the stock briefly touched upper trendline and R1 resistance at $10.56 before moving sharply lower on Tuesday. The stock briefly fell near trendline and 50-day moving average support near $8.28 before regaining ground by mid-session. The relative strength index (RSI) returned to neutral levels of 50.18, but the moving average convergence divergence (MACD) could see a bearish crossover in the near term.

Traders should watch for a rebound above the pivot point at $8.99 that could keep the current uptrend intact. If the stock breaks down below the pivot point, traders could see a move lower to test strong support at the lower trendline, 50-day moving average and S1 support near $8.00. A further breakdown from the price channel could lead to a move toward 200-day moving average support at around $7.00, although that scenario seems unlikely.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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