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AppLovin's (APP) Shares Ascend 126% YTD: Must Buy or Bye Bye?
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AppLovin Corporation (APP - Free Report) has seen its stock skyrocket 126.3% year to date. This impressive rise has significantly outpaced the 21.3% rally of the industry it belongs to and the 18.1% growth of the Zacks S&P 500 composite.
Compared with its competitors in the in-game mobile advertising space, APP’s performance is notably stronger. Alphabet Inc. (GOOGL - Free Report) has surged 18.6%, and Meta Platforms (META - Free Report) has gained 49.2% over the same period.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
As of the last trading session, the stock closed at $90.2, close to its 52-week high of $92.5. APP is trading above its 50-day moving average, indicating a bearish sentiment among investors.
APP Stock Trades Above 50-Day Average
Image Source: Zacks Investment Research
APP Recovering After a Mid-Year Correction
Despite the significant year-to-date rally, APP’s growth has been more modest in the past few months. Over the past three months, the stock is up just 10%, and it has gained 16% in the past month alone. These trends reflect the stock's ongoing recovery following a mid-year correction.
AppLovin’s recent success can be attributed to its innovative AXON 2.0 technology, expansion of gaming studios, and new initiatives aimed at driving market expansion and long-term growth. These strategic efforts have translated into robust financial results, including a 76% year-over-year revenue increase and a 41% year-over-year rise in adjusted EBITDA, with an 800-basis point expansion in the adjusted EBITDA margin in 2023. For the second quarter of 2024, the company reported a 44% year-over-year increase in revenues and a 286% surge in net income.
Although there are potential risks, such as the possibility of slowed growth in the in-game advertising segment and the uncertain impact of non-gaming ventures, AppLovin appears well-positioned for continued growth thanks to its technological advancements and strategic expansion efforts.
Promising Growth Prospects for APP
The Zacks Consensus Estimate for APP’s 2024 earnings is pegged at $3.48, indicating 255.1% growth from the year-ago level. Earnings in 2025 are expected to increase 20.2% from the prior-year actuals. The company’s sales are expected to increase 35.1% and 11.1% year over year, respectively, in fiscal 2024 and 2025.
Analysts' Confidence Reflected in Rising Estimates
Six estimates for 2024 moved north over the past 30 days versus no southward revisions. For 2025 as well, six estimates moved north over the past 30 days versus no southward revisions. This indicates strong confidence among analysts in the company's ability to improve its financial performance soon.
APP Stock is Still Cheap
Despite the impressive rally so far, AppLovin’s stock remains relatively inexpensive, indicating potential for further appreciation. If we look at the Price/Earnings ratio, APP shares currently trade at 22.9X forward earnings, well below the industry’s 35.29X. Based on trailing 12-month EV-to-EBITDA, APP is currently trading at 12.54X close to the industry’s 11.86X.
Image Source: Zacks Investment Research
APP is a Must-Buy
Given AppLovin's strong financial performance, promising growth prospects and relatively low valuation, APP presents a compelling buying opportunity. The stock's recent correction offers a favorable entry point for investors looking to capitalize on its future growth potential. With its innovative technology and strategic initiatives, AppLovin is well-positioned to continue its upward trajectory, making it a must-buy for growth-oriented investors.
Image: Bigstock
AppLovin's (APP) Shares Ascend 126% YTD: Must Buy or Bye Bye?
AppLovin Corporation (APP - Free Report) has seen its stock skyrocket 126.3% year to date. This impressive rise has significantly outpaced the 21.3% rally of the industry it belongs to and the 18.1% growth of the Zacks S&P 500 composite.
Compared with its competitors in the in-game mobile advertising space, APP’s performance is notably stronger. Alphabet Inc. (GOOGL - Free Report) has surged 18.6%, and Meta Platforms (META - Free Report) has gained 49.2% over the same period.
Year-to-Date Price Performance
As of the last trading session, the stock closed at $90.2, close to its 52-week high of $92.5. APP is trading above its 50-day moving average, indicating a bearish sentiment among investors.
APP Stock Trades Above 50-Day Average
APP Recovering After a Mid-Year Correction
Despite the significant year-to-date rally, APP’s growth has been more modest in the past few months. Over the past three months, the stock is up just 10%, and it has gained 16% in the past month alone. These trends reflect the stock's ongoing recovery following a mid-year correction.
AppLovin’s recent success can be attributed to its innovative AXON 2.0 technology, expansion of gaming studios, and new initiatives aimed at driving market expansion and long-term growth. These strategic efforts have translated into robust financial results, including a 76% year-over-year revenue increase and a 41% year-over-year rise in adjusted EBITDA, with an 800-basis point expansion in the adjusted EBITDA margin in 2023. For the second quarter of 2024, the company reported a 44% year-over-year increase in revenues and a 286% surge in net income.
Although there are potential risks, such as the possibility of slowed growth in the in-game advertising segment and the uncertain impact of non-gaming ventures, AppLovin appears well-positioned for continued growth thanks to its technological advancements and strategic expansion efforts.
Promising Growth Prospects for APP
The Zacks Consensus Estimate for APP’s 2024 earnings is pegged at $3.48, indicating 255.1% growth from the year-ago level. Earnings in 2025 are expected to increase 20.2% from the prior-year actuals. The company’s sales are expected to increase 35.1% and 11.1% year over year, respectively, in fiscal 2024 and 2025.
Analysts' Confidence Reflected in Rising Estimates
Six estimates for 2024 moved north over the past 30 days versus no southward revisions. For 2025 as well, six estimates moved north over the past 30 days versus no southward revisions. This indicates strong confidence among analysts in the company's ability to improve its financial performance soon.
APP Stock is Still Cheap
Despite the impressive rally so far, AppLovin’s stock remains relatively inexpensive, indicating potential for further appreciation. If we look at the Price/Earnings ratio, APP shares currently trade at 22.9X forward earnings, well below the industry’s 35.29X. Based on trailing 12-month EV-to-EBITDA, APP is currently trading at 12.54X close to the industry’s 11.86X.
Image Source: Zacks Investment Research
APP is a Must-Buy
Given AppLovin's strong financial performance, promising growth prospects and relatively low valuation, APP presents a compelling buying opportunity. The stock's recent correction offers a favorable entry point for investors looking to capitalize on its future growth potential. With its innovative technology and strategic initiatives, AppLovin is well-positioned to continue its upward trajectory, making it a must-buy for growth-oriented investors.
APP currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.