When SmartNews struggled to break into the U.S. market, and Picsart wanted to capture a creative community, both companies faced the same digital wall: reaching millions of users and standing out in a crowded app world.
That’s when they turned to AppLovin.
AppLovin (APP) builds models that help to show targeted ads to the users who are most likely to engage, enabling companies to acquire new users, optimize ad revenue, and make data-informed marketing decisions.
💸💰 Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰💸
Founded 12 years ago, AppLovin went public in 2021, seizing the wave of online game excitement during the Covid-19 era.
Since then, it has built a strong position in the crowded digital-ad market, competing with major players like Alphabet and Meta.
Today, AppLovin’s ad business is driven by AI advancements that enhance ad targeting, despite relatively slow growth in the company’s games unit.
TheStreet
AppLovin stock doubled after earnings
AppLovin just had its best day since its 2021 IPO.
On Nov. 7, the stock rose 46% following the company’s latest Q3 earnings, and it gained another 18% on Nov. 8.
The company reported that earnings per share for the September quarter quadrupled to $1.25 from 30 cents in the year-earlier period. Revenue climbed 39% to $1.2 billion, surpassing analysts' expectations.
Looking ahead, AppLovin forecast Q4 revenue between $1.24 billion and $1.26 billion, a projected growth rate of 30% to 32%. Analysts were expecting $1.18 billion.
AppLovin’s Axon 2 platform has been the main driver of its growth this year. Revenue for the software platform jumped 66% to $835 million, while its apps business saw a 1% increase, reaching $369 million.
Axon 2 is an updated version of AppLovin’s AI-powered ad-tech software, which came out in Q2 2023. It helps mobile-app advertisers target the right users for their ads.
The company is now pilot-testing Axon 2 with e-commerce, with promising early results.
Related: Amazon's big tech plans pay off for customers (and its pockets)
"Early data has exceeded our expectations, with the advertisers in the pilot seeing substantial returns, often surpassing those from other media channels, and in many cases experiencing nearly a 100% incrementality from our traffic," Chief Executive Adam Foroughi said on the earnings call.
Foroughi said that the e-commerce division might "scale significantly" in 2025 and become a strong contributor in the future, adding that the company is reallocating talent from other initiatives to the e-commerce team.
AppLovin stock is up by a factor seven (625%) year-to-date as of Nov. 12’s close at $289.03.
Analysts raise AppLovin stock price target after earnings
Several analysts raised their stock-price targets on AppLovin after its Q3 earnings.
Loop Capital's Rob Sanderson doubled his price target to $385 from $181 and affirmed a buy rating on the shares after the earnings and guidance, according to thefly.com.
Loop increased its multiple based on earnings before interest, taxes, depreciation and amortization to 30 from 17.5, though it expects the stock to consolidate after such "rapid revaluation."
Related: Can Intel be rescued? Analysts review embattled tech stock before earnings
The analyst suggests investors might need time to adjust to the new valuation but says Loop would be "enthusiastic buyers" of any pullback in AppLovin shares.
Stifel and JP Morgan also lifted their targets on Applovin, both citing optimism for the company's e-commerce opportunity as well as its Q4 guidance.
Stifel raised its target for AppLovin to $250 from $185 with a buy rating. JPMorgan's target is now $200, up from $160, with a neutral rating.
Oppenheimer raised its AppLovin price target to $260 from $180 and maintained an outperform rating.
More AI Stocks:
- Nvidia to reap billions in big tech AI spending
- Analysts reset ServiceNow stock price targets after earnings, AI update
- Alphabet stock leaps as Google parent crushes Q3 earnings
The investment firm highlights that investors underestimated the speed at which Axon 2 can boost performance, accelerate wider profit margins, and sustain operating leverage over the long term.
Oppenheimer adds that even without a contribution from e-commerce, AppLovin's business and financial models can justify a higher multiple.
Related: Veteran fund manager sees world of pain coming for stocks
