Mobile Video Values
09/23/2014 7:00 am EST
Kevin Kennedy uses a momentum-based strategy to select stocks in his Coolcat Report; he is particularly attracted to technical set-ups that involve a stock moving to new highs, followed by a pullback and consolidation. Here, he looks at a pair of tech plays that meet this criteria.
Glu Mobile (GLUU) develops free-to-play games for smartphone and tablet devices, including a Kim Kardashian game that launched in June and is on track to gross $200 million in the next year.
The stock has had a couple of nice runs in the past year. It jumped from near-lows just above $2 to $5.65 in a six-month spurt dotted with dips from September to March, then pulled back to $3.56 in early June.
At the end of that month, it doubled in 18 sessions to as high as $7.60 while averaging volume of more than 14 million shares a day in July.
Since then, it has pulled back below its 50-day moving average with four straight losing weeks before setting up a possible bottom. It fell 19% on July 31 after reporting second quarter earnings and announcing the acquisition of Cie Games.
GLUU lost $0.20 per share in the past four quarters and has rung up seven straight years with losses, but is expected to make $0.24 per share in the next four quarters. It trades for 3 1/2 times annual sales of $142 million.
Revenues have grown 81% and 67% in the past two quarters, and the company expects the success of the Kardashian game and the Cie Games purchase to more than double full-year revenues to $232 million.
Arris Group (ARRS) is a provider of IP, video, and broadband technology. The company delivered the first wireless broadband gateway and is focused on the personalized, Ultra HD, multi-screen, and cloud services of tomorrow.
Arris bought Motorola Home from Google’s Motorola Mobility division in 2013 for $2.35 billion and has seen its shares almost triple since the end of 2011.
Last year saw a 63% pop in the stock as the deal pushed revenues up 168% from $1.35 billion to $3.6 billion in 2013, and it’s up another 26% this year. Revenues have jumped again this year.
With a market cap of $4.4 billion, the stock sells at a slight discount to its annual sales of $4.9 billion. Earnings of $0.67 per share in the past four quarters are also expected to blast off and jump 333% to $2.90 per share in the next four quarters, giving ARRS a forward PE of 11.
After a correction bottomed out at $24.76 in April, the stock broke out again in May and marched to a peak of $35.83. It pulled back as low as $28.70 after a second quarter earnings report that missed expectations, but has trended higher since then.
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