On Wednesday, October 30, 2013 Glu Mobile ( GLUU ) reported better than expected Q3 financial results. Management also provided strong guidance for Q4 2013 and full-year 2014. After the  conference call a colleague, holding a substantial investment in Glu Mobile, phoned to say he was a little baffled by the after hours selling. He said:

I can't see anything in the financial report, the guidance or the conference call that would cause people to sell. Did I miss something? Did you see anything? It's not rational.

My colleague's assessment was spot-on and likely represents the sentiment of many Glu Mobile investors and the analysts that upgraded Glu Mobile to a "BUY." Glu's financial results and forecast were above expectations and quite impressive. Unfortunately, the cognitive process does not always produce rational behavior, but occasionally lends itself to irrational decisions and regrettable consequences, or what I prefer to call a " buying opportunity ."

That being said, we must always remember that short selling money managers, hedge funds, and other groups conduct bear raids that can easily create irrational moves in a stock's price. These groups are notorious for false rumors and headline-grabbing pseudo-news articles that are void of meaningful substance or content. However, my forte is not explaining irrational behavior in the market, but identifying and profiting from its presence.

Now lets review the real facts surrounding Glu's Q3 performance and beyond.

Q3 2013 Financial Result Actually Beat Guidance

Glu's  financial performance and projections were better than forecasted and fundamentally sound.

• Gross Revenues Beat Estimates -- During  Q2 conference call, CFO Eric Ludwig forecasted Glu's Q3 gross revenues between $19.6 million to $21 million, non-GAAP. The actual Q3 number exceeds estimates and came in at $22.6 million. This is a great number especially when you consider Glu is still transitioning into "GluOn" or games-as-a-service. Surprisingly, revenues increased in the midst of a retooling quarter.


• EPS Beats Estimates -- The non-GAAP EPS forecast for Q3 were between ($0.10) to ($0.11) loss. Once again good news prevails. Glu beats by $0.04, coming in at ($0.07). Investors should be encouraged by the EPS because they are consistent with management's historically conservative mindset not to overstate expectations.


• Total Cash Balance Up -- Glu forecasted a cash balance of $11.5 million for the end of Q3. They actually finished with $13.7 million (2.2 million above forecast) plus $14 million from stock proceeds, totaling $27.7 million. And there is a $10 million deal for warrants coming up soon with MGM Interactive.


• No Debt -- Glu Mobile has $0 debt and sufficient capital (27.7 million) to fund the expansion into Asia and rollout their "GluOn" mobile game titles in Q4 and through 2014.