We recently curated a list of 11 High-Risk High-Reward Growth Stocks To Buy Now. Here, we take a detailed look at AppLovin Corporation (NASDAQ:APP) and its ranking among the top picks.
The stock market has an ever-changing environment, leaving investors constantly looking for opportunities that promise substantial returns for their investments. Gaining a consistent placement in the portfolio of such investors is a growth stock. These growth stocks have historically been highly valued among investors seeking high investment returns. However, another essential characteristic of a growth stock is the risk proportional to its level of return. In other words, growth stocks may deliver significant capital appreciation but have heightened volatility.
Changes often influence the volatility of growth stocks in market conditions. In this regard, the U.S. market conditions underwent many changes soon after the new U.S. president entered the Oval Office. The new tariffs brought into practice have created tension between the U.S. and its neighboring countries, including Mexico and Canada. CNBC has reported that owing to the change in tariffs, the price of many commodities, including cars, has risen. It heavily impacted the U.S. stock market. Even the tech industry, which garnered high expectations, saw a decline since the beginning of 2025, though investors still regard many companies in the industry as worthy investments.
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While investors fear a potential rise in inflation and recession in the following months, some growth stocks are performing better while accumulating a high risk level. Compared to other stocks, their performance must be considered before deciding to welcome these stocks into the portfolio.
During the past decade, growth stocks have significantly outperformed their value counterparts. A report by Vanguard stated that during the last 10 years, the U.S. growth stocks have performed better than the U.S. value stocks by an average of 7.8% per year. The upward trend increases the attractiveness of growth stocks for those seeking high returns.
On the other hand, stock markets can be cyclical, with growth and value stocks shifting their leadership roles in the market. The cyclical nature suggests that growth stocks may enjoy periods of dominance, but they are not to be mistaken as immune to market rotations, which may favor value stocks.
A proper approach is necessary when investing in high-risk, high-reward growth stocks. The growth stocks may either belong to companies in emerging industries or be in possession of innovative products or services that could quickly attract the market. Though investors may be attracted to the stocks’ potential for substantial gains, they also need to be cautious of the associated risks, and hence, the approach should involve thorough research and a well-considered investment strategy.
The list we have created here could offer some assistance in an informed decision-making process for investors with respect to growth stocks.
Our Methodology
We applied a screening approach when curating our list of 11 high-risk, high-reward growth stocks to buy now. The selection criteria primarily focused on companies with strong earnings and sales growth. Since we wanted our list to be comprised of stocks with high historical performance and future potential, we considered only those with an EPS growth rate of 20% in the past five years and as the next five years’ projection. Also, only the companies with a sales growth of more than 20% in the last five years were incorporated into the list. We considered the stocks’ volatility and set the beta threshold at 1.5. Finally, market capitalization was restricted to small-cap and more extensive ($300 million+). Additionally, we looked into the number of hedge funds backing the stocks to understand the institutional interest in the stock. For this purpose, we used the Insider Monkey database of Q4 2024. The stocks are ranked according to analysts’ upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a mobile device, showing an advertiser reaching out to a consumer via a software-based platform.
AppLovin Corporation (NASDAQ:APP)
Beta: 2.31
5-Year Sales Growth: 39.75%
Number of Hedge Fund Holders: 95
Analyst Upside Potential: 63.37%
AppLovin Corporation (NASDAQ:APP), based in California, is a mobile technology company that provides AI-driven advertising solutions for app developers. The company integrates game publishing and analytics, thereby optimizing ad placement for maximum revenue. It differs from competitors like Unity and IronSource by focusing on machine learning algorithms and establishing a vast mobile app ecosystem. The company has a global reach with software platform products like AppDiscovery, MAX, SparkLabs, AppLovin Exchange, Array, Adjust, and Wurl, among others, widely used in the U.S., Asia, and Europe.
AppLovin Corporation (NASDAQ:APP) saw a massive 44% increase in total revenue, reaching $1.37 billion in the fourth quarter of 2024. Expansion of its advertising platform beyond gaming has attracted a broader set of advertisers, including e-commerce, thereby contributing to an increase in revenue. Even with the lack of full self-service capabilities limiting the company’s ability to handle growth at scale, the company has still managed to appeal to investors.
A high beta of 2.31 implies considerable price swings in the stock compared to the market. Sales have an upward trajectory, recording a 39.75% expansion over five years. Strong profitability trends are seen in the company’s past 5-year EPS growth of 84.28%. The 5-year forward projection of 38.61% suggests a moderate pace ahead.
Our Insider Monkey database noted 95 hedge funds holding positions at the end of Q4 2024, pointing to high institutional interest. Analysts predict a substantial 63.37% upside in one year, reflecting strong market sentiment.
Overall, APP ranks 3rd on our list of high-risk high-reward growth stocks to buy now. While we acknowledge the potential for APP as an investment, our conviction lies in the belief that some AI stocks hold more significant promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than APP but that trades at less than 5 times its earnings check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
