Glu Mobile's stock had its biggest gain in years on Thursday, and has Taylor Swift to thank for it. Now the company has work to do to ensure that investors don't shake it off.
Shares in the San Francisco-based maker of games for online and tablet devices jumped as much as 31.8 percent from a four-year low, a day after it announced a multi-year partnership with the superstar singer to create a “one-of-a-kind digital gaming experience." (The new game, featuring Swift, is slated for release later this year.)
It’s not the first time Glu has gotten a jolt from a celebrity deal: Its shares had a single-day spike almost exactly a year ago, when a Katy Perry partnership sent its stock soaring almost 31 percent higher. And its shares hit a post-crisis high in 2014 after it released a game made in collaboration with Kim Kardashian. (Though the games are free to play, Glu Mobile makes money when its users pay for in-app purchases on items such as clothes, hairstyles or energy.)
Analysts believe Glu has room to run, and on average, project the stock will rally some 60 percent in the next 12 months to $4.08, according to data compiled by Bloomberg.
But much has to fall into place. The company’s existing stable of games need to thrive, even as new products such as the Taylor Swift game and others featuring the likes of Kendall and Kylie Jenner, Britney Spears and Nicki Minaj (among others) come on line.
Kim Kardashian's game contributed $13.6 million or 24 percent of Glu’s fourth-quarter revenue, a steep drop from the $43 million it brought in during its first full quarter. While declining, it's a stark contrast to Katy Perry’s app, which only launched in November and has already been described as one of its biggest disappointments by chief executive Niccolo de Masi (the other was a James Bond game). The poor performance of "Katy Perry Pop" was the sole reason Glu cut its 2016 revenue guidance, showing celebrity clout doesn't always pay off.
The company has made mistakes (among these, "poor technical decisions" and "team execution issues") and will be trying to learn from them. Meantime, its larger rivals like FarmVille-maker Zynga and Candy Crush-maker King Digital have much higher valuations. That's for a reason.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
King Digital has agreed to be acquired by Activision Blizzard.
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