AppLovin Corporation (NASDAQ:APP) offers an advertisement platform to advertisers for the improvement of their marketing and monetization strategies. The company’s main platform offerings include analytics platforms such as AppDiscovery, SparkLabs, and MAX, which help developers promote and publish their mobile games. The company’s revenue model is based on generating income from business clients through its software platform, app revenues, and in-app purchases. While the company has an interesting story, is it the most unstoppable growth stock to buy now? Let’s investigate.
In the recent earnings season, some of the best advertising and marketing stocks performed quite well, mainly driven by AI. AppLovin Corporation (NASDAQ:APP) has been another one of the AI beneficiaries in the industry as its AXON 2.0 engine has enabled it to work with a broader range of advertisers and non-gaming app customers. By using predictive machine learning, Axon 2.0 precisely directs app-install ads to users who are most likely to engage and download those apps. The company management also credited increased spending from advertisers to AXON and it plans to bring improvements to it. At AppLovin Corporation’s (NASDAQ:APP) Q1 earnings call, CEO Adam Foroughi said:
“Advertisers have increased their spend on our platform as a result of the improved performance from AXON. And now, we’re seeing the industry return to growth. We stated the operating leverage of our software platform business is as good as any technology company in the world. In one year, our quarterly software business revenue grew from $355 million to $678 million. Of this incremental $323 million of revenue, 84% or $273 million flowed through to adjusted EBITDA. Now, two more themes that are important to understand as our business goes forward. First, a key driver of our growth will be the ongoing improvements to AXON. Our models are still in an early stage and will continue to improve themselves, but more importantly, our teams are still finding ways to materially improve these algorithms.”
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From Startup to Sensation: The AppLovin Evolution
AppLovin Corporation (NASDAQ:APP) was founded in 2012, launched its IPO in April 2021, and quickly rose to prominence as its share price gained by over 84% by the second week of November 2021. However, after consecutive earnings misses over the quarters, the stock took a steep hit and was down over 90% from its all-time highs by the beginning of 2023.
Nevertheless, AppLovin Corporation (NASDAQ:APP) has strapped itself on the growth train for the last four quarters and has been knocking the estimates out of the park. Over the last 5 years, the company’s net income per share has increased by 46.35% and sales grew by nearly 39%. Additionally, the company’s stock price has appreciated by nearly 230% over the last twelve months and 113% year-to-date, as of May 17. In FY 2023, AppLovin Corporation’s (NASDAQ:APP) revenue increased by 16.5% to $3.3 billion and it reported a net income of $356.711 million, compared to a net loss of $192.947 million in the prior year.
AppLovin Corporation (NASDAQ:APP) announced its first-quarter 2024 earnings on May 8, outperforming its estimates once again. The company posted Q1 GAAP EPS of $0.67, exceeding the estimates by $0.12 and its revenue was up 48% year-over-year at $1.06 billion. On top of that, the company’s adjusted EBITDA surged by over 100% year-over-year to $549 million and it generated a free cash flow of $388 million. Finally, the company closed out the quarter with $436 million in cash and cash equivalents.
For the second quarter of 2024, AppLovin Corporation (NASDAQ:APP) is looking to beat the consensus again as it initiated revenue guidance of $1.06 billion to $1.08 billion, compared to $1.01 billion analyst forecasts. According to analysts polled by Yahoo Finance, the company is expected to report an EPS of $3 in 2024 and $3.84 in 2025 based on estimates of 11 analysts. In 2023, the company posted a diluted earnings per share of $0.98.
How High Can It Go?
As of May 17, while AppLovin Corporation (NASDAQ:APP) is trading at a trailing twelve-month PE ratio of over 49x, compared to the internet services and social media industry average of 30.51x, according to data by CSI Market. While the stock is expensive relative to the industry median, Wall Street still expects further growth. According to analysts polled by the Wall Street Journal, 13 keep a Buy rating on the company stock with an average price target of $90.06, compared to its current share price of $82.5 on May 17. Macquarie analyst Tim Nollen keeps the highest price target on the company after he raised his price target to $115 from $88 on May 14 and maintained an Outperform rating, after the company posted stellar earnings.
A few days prior on May 10, Citigroup’s Jason Bazinet also raised his price target on AppLovin Corporation’s (NASDAQ:APP) stock to $98 from $80 and maintained a Buy rating on the company shares. Bazinet noted that the valuation of the company fails to adequately capture the company’s strong growth trajectory and favorable margin profile, as reported by The Fly.
Is AppLovin the Most Unstoppable Growth Stock to Buy Now?
AppLovin Corporation (NASDAQ:APP) has become one of the best growth stocks in its respective industry. While the company is trading at a high multiple, the company’s earnings are justifying its case. Moreover, after its latest earnings, Wall Street has become even more bullish on the company stock as several analysts have lifted their price targets on the stock and are predicting an over 200% growth in earnings per share in the current year and nearly 300% in 2025, compared to 2023. While its growth story looks promising, AppLovin Corporation (NASDAQ:APP) was not the most unstoppable growth stock to buy now, instead it ranked at number 3. Check out our detailed report on the 10 Unstoppable Growth Stocks To Buy to view our top picks.
Disclosure: None.