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AppLovin Stock Gains 228% YTD: Should You Buy or Wait for a Dip?
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AppLovin Corporation (APP - Free Report) has shown remarkable growth over the year-to-date period. The stock has surged 227.6%, outperforming the 28.2% rally of the industryand the 21.9% rise of the Zacks S&P 500 composite.
YTD Price Performance
Image Source: Zacks Investment Research
APP’s performance is significantly more robust than its competitors MicroStrategy Incorporated (MSTR - Free Report) and Fair Isaac Corporation’s (FICO - Free Report) surges of 166.9% and 67%, respectively, over the same period.
As of the last trading session, the stock closed at $127.8, near its 52-week high of $133.1. APP is trading above its 50-day moving average, indicating a bullish sentiment among investors.
APP Trades Above 50-Day Average
Image Source: Zacks Investment Research
However, the key concern for investors now is whether the stock’s growth trajectory justifies a “buy” at its current price or if it might be more advantageous to wait for a pullback before making a purchase.
AppLovin’s Strong Growth Potential
APP’s recent financial results show that the company has strong fundamentals and high potential to grow. Top-line growth is boosted by the introduction of its AXON 2.0 technology and strategic expansion in gaming studios. In 2023, APP reported 76% year-over-year revenue growth and a 41% EBITDA rise. The company’s financial momentum helped it perform well in the second quarter of 2024, with a 44% year-over-year revenue hike and a 286% increase in net income. Such a performance is a testament to AppLovin’s operational efficiency and effective strategic execution.
Although the possibility of slowed growth prevails in the in-game advertising segment, along with the uncertain impacts of non-gaming ventures, the company appears to be well-positioned for continued growth on its technological advancements and strategic expansion efforts.
Expansion Into New Verticals to Drive APP’s Growth
The company’s management has shown interest in the expansion of its software business by moving into new verticals from its original gaming background. In the second quarter of 2024, AppLovin piloted a program that enables e-commerce shops with websites to purchase in-app mobile game video ad inventory.
These advertisements direct game users to the website of the e-commerce shop. This service can be attractive to e-commerce websites, given that it has more than a billion daily active users. The program leverages performance-based advertising, in which advertisers pay only when they attain a measurable result, such as clicks, sales, or conversions.
The crucial part is that management anticipates its software business to grow 20-30% in the longer run without being dependent on the expansion of its verticals beyond gaming. Therefore, AppLovin’s successful expansion outside gaming could boost the software business to grow beyond the original goal.
APP’s Liquidity Exceeds Industry
The company’s liquidity position is strong, with the current ratio of 2.28 at the end of the second quarter of 2024, way above the industry’s 0.92. A current ratio above 1 indicates that the company can easily meet its short-term obligations.
Image Source: Zacks Investment Research
Strong Top & Bottom-Line Prospects for APP
The Zacks Consensus Estimate for AppLovin’s 2024 revenues is pegged at $4.4 billion, suggesting 35.2% growth from the year-ago reported level. For 2025, the top line is expected to increase 13.5% year over year.
The consensus estimate for earnings in 2024 is pegged at $3.5 per share, up 253.1% from the prior-year actuals. For 2025, the bottom line is anticipated to grow 27.8% on a year-over-year basis.
APP’s EPS Estimates Move North & Show Analyst Confidence
In the past 60 days, six estimates for 2024 earnings have been revised upward, with no downward revisions, reflecting strong analyst confidence in the company. For 2025, six estimates also moved north over the past 60 days versus no southward revisions. This indicates strong confidence among analysts in the company's ability to improve its financial performance soon.
Is AppLovin a Must-Buy Stock Now?
APP’s healthy top and bottom-line expectations, and robust liquidity position serve as a strong buying opportunity for investors. Operational efficiency, the ability to expand into new verticals and rising analyst confidence make AppLovin a compelling investment option.
While the company’s shares have gained significantly year to date, its current valuation suggests that there is still room for further appreciation, thereby, presenting a compelling case for buying the APP stock at its current levels.
Image: Bigstock
AppLovin Stock Gains 228% YTD: Should You Buy or Wait for a Dip?
YTD Price Performance
APP’s performance is significantly more robust than its competitors MicroStrategy Incorporated (MSTR - Free Report) and Fair Isaac Corporation’s (FICO - Free Report) surges of 166.9% and 67%, respectively, over the same period.
As of the last trading session, the stock closed at $127.8, near its 52-week high of $133.1. APP is trading above its 50-day moving average, indicating a bullish sentiment among investors.
APP Trades Above 50-Day Average
However, the key concern for investors now is whether the stock’s growth trajectory justifies a “buy” at its current price or if it might be more advantageous to wait for a pullback before making a purchase.
AppLovin’s Strong Growth Potential
APP’s recent financial results show that the company has strong fundamentals and high potential to grow. Top-line growth is boosted by the introduction of its AXON 2.0 technology and strategic expansion in gaming studios. In 2023, APP reported 76% year-over-year revenue growth and a 41% EBITDA rise. The company’s financial momentum helped it perform well in the second quarter of 2024, with a 44% year-over-year revenue hike and a 286% increase in net income. Such a performance is a testament to AppLovin’s operational efficiency and effective strategic execution.
Although the possibility of slowed growth prevails in the in-game advertising segment, along with the uncertain impacts of non-gaming ventures, the company appears to be well-positioned for continued growth on its technological advancements and strategic expansion efforts.
Expansion Into New Verticals to Drive APP’s Growth
The company’s management has shown interest in the expansion of its software business by moving into new verticals from its original gaming background. In the second quarter of 2024, AppLovin piloted a program that enables e-commerce shops with websites to purchase in-app mobile game video ad inventory.
These advertisements direct game users to the website of the e-commerce shop. This service can be attractive to e-commerce websites, given that it has more than a billion daily active users. The program leverages performance-based advertising, in which advertisers pay only when they attain a measurable result, such as clicks, sales, or conversions.
The crucial part is that management anticipates its software business to grow 20-30% in the longer run without being dependent on the expansion of its verticals beyond gaming. Therefore, AppLovin’s successful expansion outside gaming could boost the software business to grow beyond the original goal.
APP’s Liquidity Exceeds Industry
The company’s liquidity position is strong, with the current ratio of 2.28 at the end of the second quarter of 2024, way above the industry’s 0.92. A current ratio above 1 indicates that the company can easily meet its short-term obligations.
Strong Top & Bottom-Line Prospects for APP
The Zacks Consensus Estimate for AppLovin’s 2024 revenues is pegged at $4.4 billion, suggesting 35.2% growth from the year-ago reported level. For 2025, the top line is expected to increase 13.5% year over year.
The consensus estimate for earnings in 2024 is pegged at $3.5 per share, up 253.1% from the prior-year actuals. For 2025, the bottom line is anticipated to grow 27.8% on a year-over-year basis.
APP’s EPS Estimates Move North & Show Analyst Confidence
In the past 60 days, six estimates for 2024 earnings have been revised upward, with no downward revisions, reflecting strong analyst confidence in the company. For 2025, six estimates also moved north over the past 60 days versus no southward revisions. This indicates strong confidence among analysts in the company's ability to improve its financial performance soon.
Is AppLovin a Must-Buy Stock Now?
APP’s healthy top and bottom-line expectations, and robust liquidity position serve as a strong buying opportunity for investors. Operational efficiency, the ability to expand into new verticals and rising analyst confidence make AppLovin a compelling investment option.
While the company’s shares have gained significantly year to date, its current valuation suggests that there is still room for further appreciation, thereby, presenting a compelling case for buying the APP stock at its current levels.
APP currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.