EA, Zynga Inc (ZNGA): This Just In: Upgrades and Downgrades

Glu Mobile Inc. (NASDAQ:GLUU)
Finally, and in the only good news of the week, Northland Securities announced Monday that it’s raised its price target on mobile gamer Glu to $4.50, nearly doubling its previous prediction of $2.50 a share. Needless to say, with Glu shares currently costing only $3.16, Northland thinks you should buy the stock.

But I disagree.

Sure, Northland could be right about Glu producing more “hit” games, and making more sales than it was expected to make on smartphone apps. Problem is, no matter how many games Glu is selling, it’s still not profitable today — and, just like Zynga, not expected to become profitable anytime before 2016. And when you get right down to it, that’s really the key to why we invest in companies: We want to earn actual profits, because you can’t pay the mortgage with “accelerating sales.”

A better way to invest
Are there any gamemakers out there that are earning these actual profits, and earning enough of them to justify an investment? Actually, yes, I can think of one.

Paris-based mobile and social gamer GameLoft SA earned $22 million last year, and generated so much cash from its business that it’s free cash flow number was even a bit higher than that ($23.5 million).  At roughly 25 times earnings, and 23 times free cash flow, the stock’s not obviously cheap. But if it can achieve the kind of 20% to 30% profit growth that analysts are projecting for Zynga Inc (NASDAQ:ZNGA) and Glu — and it does operate in the same industry — the price looks fair.

Right now, there aren’t enough analysts following GameLoft to establish a good consensus number for how fast GameLoft will actually grow. That makes the stock a bit of a guessing game. Guess right, though … and you could make a bundle.

The article This Just In: Upgrades and Downgrades originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no positions in the stocks mentioned above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he’s currently ranked No. 335 out of more than 180,000 members. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!