As Zynga slides, so does Glu, but analyst upbeat
NEW YORK (AP) — Shares of Glu Mobile sold off Friday after Zynga Inc., another online games developer, slashed its guidance. But one analyst says Glu should benefit from Zynga's problem: Gamers' shift from computers to phones.
Shares of Zynga fell 17 percent Friday afternoon after the "FarmVille" maker forecast a third-quarter loss, in part because of weak demand for its Web-based games. Shares of Glu Mobile, which makes games played on smartphones and tablets, have been "punished somewhat in sympathy with (Zynga's) issues" since Zynga's IPO, said B. Riley analyst Eric Wold.
Over the past 12 months, Glu Mobile shares have gained nearly 70 percent. But gains have receded since Zynga's initial public stock offering. Since Zynga's trading debut on Dec. 16, Glu Mobile shares are only up by about 22 percent. Shares of Zynga, meanwhile, have lost more than three-quarters of their value since the IPO.
Even if Glu Mobile's stock has suffered alongside Zynga's decline, Wold said Zynga's problems aren't really relevant to Glu Mobile.
The bulk of Zynga's revenue comes from games played on Facebook's website. The San Francisco company is trying to reduce its dependence on Facebook Inc. by focusing on mobile games and Zynga.com, its online game network. Baird analyst Colin Sebastian said that transition is turning out to be "more painful than expected."
But Glu Mobile "has correctly shifted its model towards smart devices," Wold said, and is already concentrated in mobile games. He kept a "Buy" rating on the shares, saying Glu Mobile is getting better at making money from its games.
Glu Mobile has posted annual loss for the past nine years, and analysts polled by FactSet expect another one in 2012.
Glu Mobile Inc.'s stock fell 28 cents, or 6.4 percent, to $4 in afternoon trading Friday.
Zynga shed 47 cents to $2.35 Friday afternoon. It went public at $10 per share.