Buy the Earnings Dip on Glu Mobile Stock

GLUU's May 10 call is in heavy rotation today

May 7, 2019 at 2:23 PM
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Glu Mobile Inc. (NASDAQ:GLUU) stock is down 18.1% at $9.19 today in reaction to the mobile game maker's quarterly earnings report. In the first quarter, GLUU broke even on a per-share basis -- missing the consensus estimate for a 5 cents per-share profit -- though revenue of $95.9 million beat expectations. The company also raised its full-year bookings guidance to a range of $445 million to $455 million.

Analysts were quick to chime in after GLUU earnings, with Wedbush analyst Michael Pachter saying the company's "near-term pipeline lacks significant visibility." On the flip side, Benchmark waxed optimistic on Glu Mobile, saying the company's "pipeline continues to take shape," and that it's "encouraged" by several things, including GLUU's "live service game portfolio and strong growth profile." The brokerage firm lifted its price target on the stock to $14 from $11.

With GLUU stock headed toward its worst day since Dec. 21, 2015, when it slumped 19.3%, options traders are in overdrive. At last check, around 4,500 calls and 2,100 puts were on the tape -- almost seven times what's typically seen at this point in the day, and volume pacing in the 92nd annual percentile. Most active is the May 10 call, where new positions are being initiated, though it's not clear if they're being bought or sold.

More broadly speaking, it's been put traders who have been unusually active in GLUU's options pits. For starters, the 19,197 contracts currently making up put open interest arrives in the elevated 81st percentile of its annual range, compared to 31,036 calls outstanding, which registers in the 5th annual percentile.

Plus, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.31 sits higher than 87% of comparable readings taken in the past year. So, while calls have outnumbered puts on an absolute basis, the rate of put buying relative to call buying has rarely been quicker.

While some of these put buyers are likely profiting handsomely on today's bear gap, GLUU stock recently flashed a bullish technical signal. Specifically, the shares closed yesterday within one standard deviation of their 70-day moving average after a significant stretch above it. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, in the six other times this has occurred in the last three years, the security was up 13.9% one month later, with 83% of the returns positive.

Meanwhile, today's downside is being contained by GLUU's 120-day moving average, which hasn't been breached on a daily closing basis since Oct. 24, and currently resides near the security's early March highs. Year-to-date, the equity is still up 13.7%.

gluu stock price chart on may 7


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