We recently published a list of the 12 Best Up and Coming Stocks to Buy According to Wall Street Analysts. In this article, we are going to take a look at where Applovin Corporation (NASDAQ:APP) stands against other up and coming stocks to buy according to Wall Street Analysts.
Tom Lee, Fundstrat managing partner, joined CNBC’s ‘Closing Bell’ on March 22 to discuss the current market sentiment. When asked about the recent report on tariffs, which oscillates between an iron fist and an olive branch, Lee expressed optimism. He suggested that markets should interpret the situation positively because many clients view tariffs as punitive and potentially recession-inducing. However, a mutually agreed or reciprocal tariff deal could create a favorable scenario for businesses, potentially setting the stage for a significant recovery rally. Addressing the immediate challenge of volatility leading up to April 2, Lee acknowledged the dilemma investors face during this period of uncertainty. He noted that many are overwhelmed by market fluctuations and tempted to give up. Drawing a parallel to the Cuban Missile Crisis in 1962, which lasted 12 days, Lee pointed out that markets historically bottom before crises are resolved. For instance, during that crisis, the stock market reached its lowest point seven days in and recovered two-thirds of its losses before the resolution. He suggested this historical pattern could serve as a template for today’s market behavior.
When asked about the economy, Lee remarked on how quickly sentiment has deteriorated. He attributed part of this decline to divisive political leadership that affected consumer confidence and noted that CEO confidence has also dropped unexpectedly. CEOs have become hesitant to make decisions, which is contributing to what he described as a growth shock. However, he remained hopeful that this slowdown would be temporary if it does not persist for months. The conversation shifted to concerns about a potential recession, with Jeffrey Gundlach recently estimating a 50% to 60% chance of one occurring in the next few quarters. Lee countered this by stating that while a 10% drawdown in the S&P 500 already prices in a 40% chance of recession, markets do not fully align with Gundlach’s pessimistic view. He highlighted that economies like China, Europe, Canada, and Mexico have been outperforming the US since February 18. If punitive tariffs were truly driving global recessions, these economies would also be struggling. Instead, Lee described markets as more paralyzed than outright pessimistic.
Our Methodology
We used the Finviz stock screener to compile an initial list of the top stocks that went public in the last 5 years. We then selected the 12 stocks with high analysts’ upside potential as of March 21 that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
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)
Average Upside Potential as of March 21: 80.93%
Number of Hedge Fund Holders: 95
Applovin Corporation (NASDAQ:APP) develops a software platform that enhances marketing and monetization for advertisers across mobile and connected TV. It operates through advertising and app segments and provides tools like AppDiscovery, MAX, Adjust, and Wurl, along with mobile games. It serves individual users, small businesses, enterprises, and app developers.
In Q4 2024, the company’s AI-driven advertising segment achieved $999 million in revenue and $777 million in adjusted EBITDA, which resulted in a 78% margin. This success was attributed to the platform’s effectiveness in attracting e-commerce advertisers during the holiday season. To further capitalize on this growth, the company is prioritizing the development of automated tools for self-service advertising. It’s also divesting its Apps (gaming studio) business for an estimated $900 million to focus on its high-margin advertising platform.
For Q1 2025, the company projects the Advertising business to generate revenue between $1.030 and $1.050 billion. On March 20, Citi analyst Jason Bazinet reiterated a Buy rating and $600 price target for the company due to its AI-powered marketing platform. The company’s game studio sale in H2 2025 is expected to boost revenue by $75 million annually, as new owners will likely use Applovin Corp.’s (NASDAQ:APP) Ads platform, which will match Q4 2024 eCommerce revenue.
The company’s leading position in mobile app advertising, which is driven by its AI engine and potential expansion into e-commerce, contributed to the ClearBridge Mid Cap Strategy’s strong IT performance. It stated the following regarding Applovin Corp. (NASDAQ:APP) in its Q4 2024 investor letter:
“Stock selection in IT was the greatest contributor to performance on strength in AppLovin Corporation (NASDAQ:APP) and Marvell. AppLovin is the world’s leading mobile game and app advertising platform, providing software for marketing and monetization, powered by its proprietary AI targeting engine Axon. We see opportunity for AppLovin to continue to expand and grow its share of the market for mobile app marketing at a time when mobile gaming ad spend is recovering from a higher-rate-driven trough. We also see the potential for the company to expand its addressable market to include e-commerce advertising, around which initial forays have been encouraging. With strong incremental margins and management keeping expenses controlled, the company should be able to drive significant free cash flow growth as revenue continues to scale.”
Overall, APP ranks 5th on our list of the best up and coming stocks to buy according to Wall Street Analysts. While we acknowledge the growth potential of APP, our conviction lies in the belief that AI stocks hold great promise for delivering high 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.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.