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AppLovin (APP - Free Report) is a Zack Rank #1 (Strong Buy) that specializes in mobile advertising, app monetization, and app discovery. It provides a suite of tools and services for mobile app developers to help them promote, monetize, and optimize their apps.
The stock has drawn interest from AI investors this year through its AI-powered software platform AXON. However, many are worried that the company will be unable to maintain 20% Software Platform revenue growth.
While investors have reason to be skeptical, the most recent earnings report and subsequent price action look very bullish for AppLovin.
About the Company
AppLovin was founded in 2011, has a market cap of $25 billion, and employs over 1,700.
The company operates through two segments: Software Platform and Apps. Key software solutions include AppDiscovery for matching advertiser demand with publisher supply, MAX for optimizing ad inventory value through real-time auctions, adjust for marketing analytics, and Wurl for distributing streaming video and providing advertising solutions. Other offerings include SparkLabs for app store optimization, AppLovin Exchange for connecting buyers to mobile and CTV devices, and Array for app management.
The company also runs various free-to-play mobile games.
The stock has a Zacks Style Score of “A” in Growth and Momentum. It sports a Style Score of “D” in Value, with a Forward PE of 22.
Q2 Earnings
On August 7th, AppLovin reported a 15% EPS beat and revenues came in line. Q2 earnings were $0.89, surpassing estimates of $0.77, while revenues were $1.08 billion. Q2 Adjusted EBITDA was $601 million, up 80% year-over-year, with a 56% margin.
The company provided Q3 guidance with revenue expected between $1.12 billion and $1.14 billion, exceeding the $1.09 billion estimate. Adjusted EBITDA for Q3 is projected at $630-650 million, with a margin of 57%.
Monthly Active Payers (MAPS) decreased to 1.6 million from 1.7 million year-over-year. The company also repurchased 4.2 million shares for $356 million and has $500 million remaining under its repurchase authorization.
After the numbers were released, the stock traded over 10% lower during the after-hours session. However, buyers stepped in and the stock recovered losses quickly. The stock then continued its upward momentum the next day, with the stock trading up as much as 14%.
Since reporting earnings, analysts have been significantly increasing their estimates for AppLovin.
Over the past seven days, the estimates for the current quarter have risen by 19%, from $0.75 to $0.89. For the current year, estimates have increased from $3.06 to $3.48, marking a 14% increase in the same timeframe. A similar trend is observed for next year, with estimates rising by over 17%, moving from $3.57 to $4.18.
Additionally, several firms have adjusted their price targets, with some lifting or maintaining targets above $100:
Oppenheimer reiterated its "Outperform" rating, raising the price target to $105 from $97.
Jefferies maintained its price target at $105.
Overall, the trend of increased price targets reflects greater optimism among analysts. The consensus is that the stock is undervalued in its core gaming ads business and has significant multiple expansion potential through eCommerce.
The Technical Take
The stock is up almost 100% in 2024, so some investors are worried about chasing this name. While this is understandable, the stock is in a bullish setup.
The recent violent sell-off in the global equity markets took APP down with it. But this allowed investors to buy the stock at the 200-day moving average. After earnings, this level was tested again and the stock bounced aggressively.
With the moving average support, the $58 level was also the 61.8% Fibonacci retracement for 2024. It is clear this level is big for the bulls and with a bounce up to the 21-day MA at $77, the stock is now looking to break support.
One big negative is that the 21-day MA is under the 50-day MA at $80. However, if the bulls can break over that resistance, then 2024 highs are likely in play. Additionally, there are Fibonacci levels above $100 that would make excellent targets for the bulls.
In Summary
AppLovin's strategic positioning in mobile advertising, backed by its AI-powered platform AXON, has attracted considerable interest in the investor community.
The sharp increase in analyst estimates and the reaffirmation of positive price targets indicate that the market is optimistic about AppLovin's future. As the company continues to capitalize on its unique offerings, it appears poised for further success in the burgeoning mobile and app development industry.
As the broader market conditions stabilize, AppLovin's blend of growth, innovation, and strategic execution may continue to drive its stock price upward, rewarding those who position themselves early.
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Bull of the Day: AppLovin (APP)
AppLovin (APP - Free Report) is a Zack Rank #1 (Strong Buy) that specializes in mobile advertising, app monetization, and app discovery. It provides a suite of tools and services for mobile app developers to help them promote, monetize, and optimize their apps.
The stock has drawn interest from AI investors this year through its AI-powered software platform AXON. However, many are worried that the company will be unable to maintain 20% Software Platform revenue growth.
While investors have reason to be skeptical, the most recent earnings report and subsequent price action look very bullish for AppLovin.
About the Company
AppLovin was founded in 2011, has a market cap of $25 billion, and employs over 1,700.
The company operates through two segments: Software Platform and Apps. Key software solutions include AppDiscovery for matching advertiser demand with publisher supply, MAX for optimizing ad inventory value through real-time auctions, adjust for marketing analytics, and Wurl for distributing streaming video and providing advertising solutions. Other offerings include SparkLabs for app store optimization, AppLovin Exchange for connecting buyers to mobile and CTV devices, and Array for app management.
The company also runs various free-to-play mobile games.
The stock has a Zacks Style Score of “A” in Growth and Momentum. It sports a Style Score of “D” in Value, with a Forward PE of 22.
Q2 Earnings
On August 7th, AppLovin reported a 15% EPS beat and revenues came in line. Q2 earnings were $0.89, surpassing estimates of $0.77, while revenues were $1.08 billion. Q2 Adjusted EBITDA was $601 million, up 80% year-over-year, with a 56% margin.
The company provided Q3 guidance with revenue expected between $1.12 billion and $1.14 billion, exceeding the $1.09 billion estimate. Adjusted EBITDA for Q3 is projected at $630-650 million, with a margin of 57%.
Monthly Active Payers (MAPS) decreased to 1.6 million from 1.7 million year-over-year. The company also repurchased 4.2 million shares for $356 million and has $500 million remaining under its repurchase authorization.
After the numbers were released, the stock traded over 10% lower during the after-hours session. However, buyers stepped in and the stock recovered losses quickly. The stock then continued its upward momentum the next day, with the stock trading up as much as 14%.
AppLovin Corporation Price and EPS Surprise
AppLovin Corporation price-eps-surprise | AppLovin Corporation Quote
Estimates Rising
Since reporting earnings, analysts have been significantly increasing their estimates for AppLovin.
Over the past seven days, the estimates for the current quarter have risen by 19%, from $0.75 to $0.89. For the current year, estimates have increased from $3.06 to $3.48, marking a 14% increase in the same timeframe. A similar trend is observed for next year, with estimates rising by over 17%, moving from $3.57 to $4.18.
Additionally, several firms have adjusted their price targets, with some lifting or maintaining targets above $100:
Overall, the trend of increased price targets reflects greater optimism among analysts. The consensus is that the stock is undervalued in its core gaming ads business and has significant multiple expansion potential through eCommerce.
The Technical Take
The stock is up almost 100% in 2024, so some investors are worried about chasing this name. While this is understandable, the stock is in a bullish setup.
The recent violent sell-off in the global equity markets took APP down with it. But this allowed investors to buy the stock at the 200-day moving average. After earnings, this level was tested again and the stock bounced aggressively.
With the moving average support, the $58 level was also the 61.8% Fibonacci retracement for 2024. It is clear this level is big for the bulls and with a bounce up to the 21-day MA at $77, the stock is now looking to break support.
One big negative is that the 21-day MA is under the 50-day MA at $80. However, if the bulls can break over that resistance, then 2024 highs are likely in play. Additionally, there are Fibonacci levels above $100 that would make excellent targets for the bulls.
In Summary
AppLovin's strategic positioning in mobile advertising, backed by its AI-powered platform AXON, has attracted considerable interest in the investor community.
The sharp increase in analyst estimates and the reaffirmation of positive price targets indicate that the market is optimistic about AppLovin's future. As the company continues to capitalize on its unique offerings, it appears poised for further success in the burgeoning mobile and app development industry.
As the broader market conditions stabilize, AppLovin's blend of growth, innovation, and strategic execution may continue to drive its stock price upward, rewarding those who position themselves early.