Glu Mobile Inc. (GLUU) shares opened about 2% lower during Monday's session as traders took profits off of the table following last week's earnings run-up early in the trading session.

Morgan Stanley downgraded Glu Mobile stock to Equal Weight from Overweight but raised its price target from $8.00 to $10.50 per share. Analyst Matthew Cost believes that the market has fully appreciated the momentum that the company has gained throughout the pandemic and sees significant margin expansion baked into the share price, which has doubled in recent weeks.

Revenue rose 11.9% to $107.3 million during the first quarter, beating expectations by $10.55 million, while net losses registered at $0.06 per share, which was one cent per share worse than expectations. Bookings rose by a much-better-than-expected 15% during the quarter, and the company believes that it could reach $500 million by the end of the year.

Chart showing the share price performance of Glu Mobile Inc. (GLUU)
TrendSpider

From a technical standpoint, Glu Mobile stock broke out from prior highs and trendline resistance earlier this month and extended the breakout following its first quarter financial results on Friday. The relative strength index (RSI) moved into overbought territory with a reading of 80.95, but the moving average convergence divergence (MACD) remains in a bullish uptrend. These indicators suggest that the stock could see some consolidation.

Traders should watch for some consolidation above Fibonacci support at $9.13 to trendline support at around $8.40 over the intermediate term. If the stock breaks down from those levels, traders could see a move toward the 200-day moving average at about $7.00, but that scenario appears unlikely given the bullish momentum. If the stock rebounds higher, traders should look for a move past $10.70 to fresh highs.

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