January 24, 2025
One of the leading growth stocks last year, AppLovin’s smart user acquisition solutions helped the stock soar beyond all expectations.
AppLovin operates a mobile app marketing platform which provides tools to developers to improve the monetization and marketing of their content in the United States and internationally.
The company’s e-commerce advertising service matches advertiser demand with publisher supply through the use of auctions. AppLovin also offers bidding software that optimizes the value of a publisher’s advertising inventory. Its ‘Adjust’ platform delivers analytics that provides marketers with visibility, insights and tools needed to grow their apps from early stage to maturity.
The Palo Alto, California-based company’s business to date has largely been driven by ads for mobile gamers, but AppLovin is adapting as it seeks to diversify its customer base. AppLovin’s newer e-commerce beta program includes several hundred advertisers, including companies involved in the beauty and cosmetics industry.
Late last year, UBS analyst Chris Kuntarich spoke with an executive at a cosmetics brand involved in the e-commerce beta program. The executive “was bullish on spending with AppLovin,” according to initial results that proved reassuring.
The software provider has benefitted from its roots in mobile game advertising, as games typically provide a more focused and longer attention span than other advertising channels. But the real growth opportunity for AppLovin lies in its ability to scale its advertising product to non-gaming advertisers.
Oppenheimer analyst Martin Yang recently reiterated his ‘outperform’ rating on APP stock, emphasizing that AppLovin’s total addressable market could double in the short-term if the company is able to seize current growth opportunities.
In its most recent quarterly report, AppLovin smashed earnings expectations. The mobile technology company delivered Q3 earnings of $1.25 per share, representing growth of 317% versus the year-ago period. Sales during the third quarter surged 39% to $1.2 billion. In the prior-year period, AppLovin earned 30 cents per share on revenues of $864 million.
The company also guided higher on its fourth-quarter projections, forecasting revenue of $1.25 billion – ahead of the $1.18 billion analysts were expecting.
AppLovin surpassed earnings estimates in each of the past six quarters, and has delivered a trailing four-quarter average earnings surprise of 26.2%. Looking into 2025, analysts covering APP have raised their full-year EPS estimates by 6.25% in the past 60 days to $6.12 per share. If the company is able to achieve this, it would translate to a potential growth rate of 50.6% versus last year. Revenues are anticipated to climb 23.5% to $5.68 billion.
There’s been a lot of chatter about APP stock potentially slowing down this year following its meteoric rise. But with analysts projecting the momentum to continue in 2025, the run for this growth stock could be just getting started.
A Zacks Rank #1 (Strong Buy), AppLovin APP rewarded investors in 2024 with an astounding 712% return. The stock looks to regain its momentum and remains above upward-sloping 50-day (blue line) and 200-day (red line) moving averages:
APP stock is clearly displaying relative strength, breaking out to the upside and separating itself from the field. Increasing volume has attracted investor attention as buying pressure continues to accumulate in this top-ranked stock. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, AppLovin has recently witnessed positive revisions. As long as this trend remains intact (and APP continues to deliver earnings beats), the stock may continue its bullish momentum.
Backed by a leading industry group and history of earnings beats, it’s not difficult to see why APP stock is a compelling investment. Durable fundamentals combined with an appealing technical trend certainly warrant a closer look.
The company also boasts top marks in our Zacks Growth Style Category, indicating that shares are likely to outperform the market based on powerful sales and earnings growth.
Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put APP on your shortlist.
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