Now valued at $96.6 billion by market cap, AppLovin Corp. (APP) is a mobile advertisement firm that provides developers with a platform that allows them to target, engage, monetize, analyze, and retain their existing customer base. The company operates through two major segments, Apps and Software Platforms, with a customer base comprised of individuals, businesses, advertisers and advertising networks, enterprises, developers, and internet platforms.
APP stock has emerged as a massive outperformer, delivering returns of 1,576% over the past two years. In 2024 alone, the stock is up 612%, and is fresh off a new record high of $292.86 set as recently as Nov. 8.
AppLovin Posts Solid Results
AppLovin posted its Q3 results after the close last Wednesday, Nov. 6, with its profit of $434.4 million, or $1.25 per share, easily outperforming against the average analyst estimate of $0.95 per share. The company also posted revenue of $1.2 billion for the quarter, which was again better than the market’s $1.13 billion estimate.
The digital ad specialist reported EBITDA of $721.6 million during the quarter, topping the estimate of $645.5 million, while its gross margin rose to 77.5%, increasing from last year’s 69.3%. The operating margin of 44.6% more than doubled from last year’s 21.6%, with an EDITDA margin of 60.2%.
Plus, APP closed the quarter with a cash balance of $567.60 million, up from last year’s $502.15 million.
Management expects a big quarter to close out the year, too, as they see Q4 revenue in the range of $1.24 billion to $1.26 billion, outpacing analyst’s $1.18 billion estimate, with an adjusted EBITDA guidance range of $740 million to $760 million and adjusted EBITDA margin of 60%.
APP spiked 46% in a single session on Nov. 7 as investors cheered the earnings report and upwardly revised guidance.
How Do Analysts Rate APP Stock?
With 19 experts in coverage, APP has a consensus “Moderate Buy” rating - though the shares are now trading well above their mean price target of $225.40.
After earnings, investment firm Daiwa Securities upgraded APP stock to “Outperform” from “Neutral,” with analyst Jonathan Kess citing gains in the company's addressable market and improved cash flows.
“Growth of 20-30% can be attained just within the mobile gaming sector as APP’s AI continues to learn and drive company and market growth,” wrote Kess in a note to clients, adding that “Street [estimates] remain conservative in our view and we see upside potential.”
The analyst raised his price target for APP to $280 from $80, which the stock has already outrun. The Street-high price target of $385, courtesy of Loop Capital, suggests that AppLovin shares can rise another 35.6% from here.
With a price/earnings-to-growth (PEG) ratio of 1.63, APP looks like a reasonable AI growth stock to consider for long-term upside.
