Title: Soaring AppLovin Stock: A 99% Surge in November
Investors rejoiced last month as AppLovin (APP -0.24%) shares skyrocketed a whopping 98.8%, according to data from S&P Global Market Intelligence. The excitement began with a blockbuster financial report, but it was only the beginning for the app monetization and artificial intelligence (AI) specialist.
Celebrating the numbers
Early November saw the release of AppLovin's third-quarter financial report, surpassing investors' expectations with revenue of $1.2 billion, a 39% increase year over year. This contributed to an adjusted earnings per share (EPS) of $1.25, both figures smashing the high end of management's guidance. Analysts had predicted revenue of $1.13 billion and an EPS of $0.92, but AppLovin sailed past those estimates with ease.
The bullish forecast that followed from management – projecting revenue of $1.25 billion and EPS of $0.65 for the next quarter – set the stage for additional price target increases, upgrades, and even one analyst initiating bullish coverage on the stock. The wave of bullish commentary from Wall Street fueled investor enthusiasm to new heights.
Moving forward
AppLovin's AI-powered software enables developers to increase their app's profitability. Its new system greatly boosted the company's growth, and CEO Adam Foroughi expressed confidence in achieving at least 20-30% year-over-year growth from mobile gaming advertisers in the near future.
While the company is focused on mobile gaming advertisers now, Foroughi mentioned e-commerce as another potential growth area. He expressed optimism that e-commerce would "scale significantly in 2025" and become a substantial contributor to the company's growth.
The investment outlook
Wall Street remains optimistic about AppLovin. Of the 25 analysts surveyed, 19 rated it a buy or strong buy, and not a single one recommended selling. Oppenheimer analyst Martin Yang holds the largest bullish stance, assigning a target price of $480, which represents a 20% potential increase from the stock's latest closing price. Yang's research indicates that AppLovin's return on ad spending is comparable to digital advertising market leaders like Meta Platforms.
Despite its compelling growth story, AppLovin's stock is currently selling at a high multiple – 58 times next year's earnings. Potential investors should be on the lookout for dips in the stock price as an opportunity to enter the market.
Enrichment Data:
Overview:
Analyst opinions towards AppLovin's stock and future growth are largely optimistic, albeit mixed. Key points include:
- Average Rating and Price Target:
- An average buy rating from 20 analysts, with a 12-month stock price forecast of $320.42, indicating a 12.06% decrease from the latest price[2].
- Another source lists an average 12-month price target of $344.62, with a high estimate of $480.00 and a low estimate of $70.00[4].
- Revenue and Earnings Growth:
- Net revenue growth of 43% from Q1 to Q3, but analysts predict a decline in growth in 2025[1][5].
- Approximately 45% earnings growth is expected within the next 12 months[5].
- Valuation Concerns:
- High valuation with a price-to-earnings ratio of 110.14 and a forward price-to-earnings ratio of 65.09, as reported in January 2025[2].
- Some analysts believe that the stock is overvalued, with a consensus price target suggesting a 5% overvaluation[1].
- AI Potential and Expansion:
- AI-based software is seen as a significant growth opportunity, particularly in the e-commerce space[1].
- The company's expansion of AI capabilities could justify the lofty valuation if successful[1].
- Market Index Inclusion:
- The potential inclusion of AppLovin in the S&P 500 could result in a bullish impact, similar to what Palantir Technologies experienced in 2024[1][5].
Investors looking to capitalize on AppLovin's growth may want to consider investing in the company, given its impressive third-quarter financial results and analysts' bullish forecasts. The AI-powered software, which boosts app profitability, is expected to drive the company's revenue and earnings, especially in the mobile gaming and e-commerce sectors.
Amidst the positive sentiment, potential investors should keep an eye on potential dips in the stock price to enter the market at a lower cost, considering its current high valuation.
