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What's in the Cards for Glu Mobile (GLUU) in Q3 Earnings?

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Glu Mobile, Inc. , a developer of gaming applications for smartphones and tablets, is set to release third-quarter 2016 results on Nov 3. The company reported a positive earnings surprise of 25.00% in the last reported quarter. Furthermore, the company has delivered positive earnings surprises in the trailing four quarters with an average beat of 55.36%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

The company’s roster of celebrity games is one of its biggest positives. Its super successful game Kim Kardashian: Hollywood continues to be a big contributor to revenues (albeit slowing down). In the last reported quarter, the top line also benefitedfrom the launch of Tap Sports Baseball 2016as well as Racing Rivals and Cooking Dash 2016.

At its last reported earnings, the company stated that it plans to turn its 85 games (released over past 6 years) into “evergreen revenue generators” by adding new gameplay modes, community-enhancing features etc, which is likely to help it to grow bookings by first half of 2017. For this year, it now has just one new title for release, Nicki Minaj: Empire and plans to release another 4-6 evergreen titles next year.

For the third quarter, Glu Mobile expects revenues in a range of $50 million to $52 million and EBITDA in a range of loss of $3.5 million to $4 million. Loss per share is expected to be in a range 3 to 4 cents. The third quarter is expected to benefit from the success of Tap sports although slowing down), Gordon Ramsay: Dash and Rival Fire.

However, growing competition from established players like Electronic Arts and Activision Blizzard might make it difficult for the company to register strong growth in the near term. Further, significant investment in research and development of new games will likely be a headwind for the company and put pressure on margins.

Earnings Whispers?

Our proven model does not conclusively show that Glu Mobile is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate andthe Zacks Consensus Estimate are pegged at a loss of 5 cents.Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Glu Mobile carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and #5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

GLU MOBILE INC Price and EPS Surprise

GLU MOBILE INC Price and EPS Surprise | GLU MOBILE INC Quote

Stocks to Consider

Here are a couple of stocks, which you may consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Stratasys Ltd.(SSYS - Free Report) with an Earnings ESP of +41.67% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

EVINE Live Inc. (EVLV - Free Report) with an Earnings ESP of +25.00% and a Zacks Rank #1

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