AppLovin's AI-Powered Adtech Drives Explosive Growth and Stock Surge

Up Over 900% in the Last Year, Investors Continue to Love AppLovin's Strong Growth. Is It Too Late to Buy the Stock? | The Motley Fool

AppLovin (APP 8.15%) continues to be one of the hottest stocks around, with its shares surging following its fourth-quarter earnings report. The stock is up more than 900% over the past year, as of this writing. AppLovin's main business is an adtech platform that mobile app developers use to attract users and better monetize their apps. It also owns a legacy portfolio of its own apps. The company has seen explosive growth since the launch of its Axon 2 AI-based advertising technology solution in the second quarter of 2023. Let's take a closer look at this top-performing artificial intelligence (AI) stock's most recent results, and see whether it's too late to buy the stock. Axon 2 continues to drive AppLovin's growth, with advertising (previously called software platform) segment revenue surging 73% to $999.5 million. Its Apps portfolio revenue, meanwhile, fell 1% to $373.3 million. Overall revenue jumped 44% to $1.37 billion, surpassing the $1.26 billion consensus as compiled by LSEG. The company continues to see solid gross margin improvement, with it rising to 76.7% from 71.3% a year ago. AppLovin was able to reduce its sales and marketing spend by 4%. This is helping profitability metrics grow even faster than revenue. Earnings per share (EPS) soared from $0.49 a year ago to $1.73, crushing the $1.24 consensus. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meanwhile, surged 78% to $848 million. Advertising adjusted EBITDA skyrocketed 85% to $777 million, while its apps business grew adjusted EBITDA by 27% to $71.3 million as the company continues to focus on the cost side of this business. AppLovin generated $701 million in operating cash flow and $695 million in free cash flow. It ended the year with $2.8 billion in net debt. Looking ahead, AppLovin forecast first-quarter revenue to be between $1.355 billion to $1.385 billion, representing growth of between 28% and 31%. It guided for Q1 adjusted EBITDA to range between $855 million and $885 million, up from $549 million a year ago. Meanwhile, the company announced that it will sell its App business for total considerations of around $900 million, including $500 million in cash. The deal is expected to close in Q2. The transaction will allow the company to be a pure-play adtech company. One of the company's big focuses for 2025 will be development of self-service capabilities for advertisers. This will allow it to drive revenue growth without having to hire more employees. AppLovin said it has seen early success in the e-commerce vertical, and not only with direct-to-consumer brands. However, while the company is confident that e-commerce will be a material contributor in 2025, it is unsure of the exact timing. AppLovin also noted that it is not looking to compete for the same ad dollars as traditional social media companies, but to instead expand the category. I've written positive articles about AppLovin since last April, when the stock was trading in the low to mid $70s. At that time, the stock only had a forward price-to-earnings (P/E) of about 17 times 2024 analyst estimates. Today, with the stock trading around $500 as of this writing, its valuation has -- surprisingly -- not increased a lot. Today, the stock trades at a forward P/E of over 65 times 2025 analyst estimates calling for EPS of $7.65. If the company can successfully move beyond the gaming vertical, I think the stock should continue to have solid upside. It has talked about long-term revenue growth of between 20% to 30% just from the gaming vertical, stemming from both industry growth and improvements in its algorithm. If e-commerce and other verticals can fuel even more revenue growth, then the stock's valuation doesn't look too frothy. The move to self-service should help boost revenue growth as well. Meanwhile, I like that it is selling its app portfolio, which will only shine an even greater spotlight on its adtech business. That can help the company reduce its debt and show stronger overall revenue growth. That said, after the huge gains, I think investors should at the very least take some partial profits in the stock. The stock has been on a great run, but it is no longer the high-growth bargain it was in the past. As such, I would not chase the stock here.

AppLovin stock just skyrocketed 30%: 700% growth and counting

AppLovin (APP) shares surged nearly 30% in extended trading on Wednesday following the company's positive fourth quarter earnings report, which exceeded Wall Street expectations. The artificial intelligence (AI)-powered advertising platform also provided an optimistic outlook for the current quarter. The company projected first-quarter revenue between $1.36 billion and $1.39 billion, surpassing the $1.32 billion analysts had anticipated. Executives indicated that approximately $1 billion of this revenue would originate from AppLovin's advertising segment, noting that the company remains in the early stages of enhancing its AI capabilities. As of Wednesday's market close, AppLovin shares have risen 17% since the beginning of the year and have experienced a remarkable increase of over 700% over the past 12 months, driven by heightened demand for its AI-powered advertising services. Apple just gave Alibaba stock a 5% burst: Should you buy in? Since reaching an all-time high (ATH) in early December, AppLovin shares have consolidated within a pennant pattern, suggesting a continuation of the stock's upward trajectory. The price is poised to open higher on Thursday, indicating a potential further increase. The relative strength index (RSI) confirms bullish momentum with a reading above 70. However, moving into overbought territory may lead to potential profit-taking dips. To forecast an upside price target, investors can apply the measured move technique to AppLovin's chart. The calculation involves adding the distance of the preceding uptrend to the pennant's upper trendline. In this case, the projected upside price target is $754, an area where investors might consider locking in profits. Should the stock undergo pullbacks, an initial dip may occur around the $290 mark, a level likely to provide support near the pennant pattern's low. If selling continues below this level, shares could decline to approximately $168, where buying interest might emerge near the 50-period moving average and a previous consolidation range prior to last November's election-driven surge. A more considerable correction could see the stock fall to lower support around $116. Investors using buy-and-hold strategies may look for entry points in this region, particularly near the notable November 2021 swing high. According to LSEG data, AppLovin reported earnings per share of $1.73, exceeding the expected $1.24. Revenue reached $1.37 billion, above the anticipated $1.26 billion. Net income for the quarter soared to $599.2 million, up from $172.3 million, and revenue increased by 43% from $953.3 million a year earlier. AppLovin was recognized as the best-performing U.S. tech stock last year, attributed to its AI-driven advertising system. This year, the company launched AXON 2.0, an upgraded ad search engine that enhances targeted ads across its gaming apps and for studios licensing the technology. Traditionally, AppLovin's business comprised both advertising and app segments. However, with growth in the advertising sector, the company announced plans to sell its apps division, as stated by CEO Adam Foroughi during the earnings call. The agreement for the sale is anticipated to yield a total estimated consideration of $900 million, including $500 million in cash and the remainder as a minority equity stake in the new private company. Advertising revenue rose 73% in the last quarter, nearing $1 billion. The ad business was reclassified from Software Platform to reflect that advertising now generates "substantially all" revenue in that segment. AppLovin expects first-quarter revenue to fall between $1.36 billion and $1.39 billion, surpassing the $1.32 billion average analyst estimate, according to LSEG. The company stated that it continues to enhance its AI models, which it believes will drive further value creation for its shareholders. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

AppLovin's Stock Rallies After Solid Q4 Growth, Underscores Ability To Scale Profitably, Analysts Say - AppLovin (NASDAQ:APP)

Shares of AppLovin Corp APP were climbing in early trading on Thursday, after the company reported upbeat fourth-quarter results. The company reported its quarterly results amid an positive earnings season. Here are some key analyst takeaways. BofA Securities On AppLovin Analyst Omar Dessouky reaffirmed a Buy rating, while raising the price target from $375 to $580. The magnitude of AppLovin's fourth-quarter beat was "completely unexpected," Dessouky said in a note. eCommerce is estimated to have contributed around $100 million in revenues in the quarter in addition to the 7% sequential growth in net revenue from mobile game advertisers, he added. The high end of management's revenue guidance for the first quarter reflects 5% sequential growth, "driven by self-learning in both eCommerce and Gaming models," the analyst stated. "APP's reported financial performance supports the notion that eCommerce ads work and that revenue could scale to penetrate 10mn+ merchants globally," he further wrote. JPMorgan On AppLovin Analyst Cory Carpenter reiterated a Neutral rating, while lifting the price target from $325 to $475. AppLovin's advertising revenue growth accelerated from 17% sequentially in the previous quarter to 20% in the fourth quarter and came in significantly higher than the guidance of 4%-5%, Carpenter said. Adjusted EBITDA of $848 million represented 78% year-on-year growth and beat the guidance of $740 million to $760 million, he added. "APP also noted successful early pilots in verticals beyond e-commerce such as fintech, insurance, automotive, and healthcare," the analyst wrote. Management guided to revenues of $1,355 million to $1,385 million, up 29% year-on-year as well as adjusted EBITDA of $855 million to $885 million, up 59%, well above consensus estimates of $1,319 million and $794 million, respectively, he stated. Benchmark On AppLovin Analyst Mike Hickey maintained a Buy rating, while raising the price target from $375 to $525. AppLovin reported 73% year-on-year in advertising revenue growth, Hickey said. The company's first-quarter revenue and AEBITDA guidance came 4% and 10% above consensus, respectively, "fueled by AI-driven ad optimization, non-gaming expansion, and self-serve advertising tools," he added. "AppLovin is undergoing a strategic transformation, shifting from a gaming-centric ad platform to a pure-play adtech leader with a focus on AI-driven advertising and automation," the analyst wrote. The company's robust performance in the fourth quarter "underscores its ability to scale profitably." Check out other analyst stock ratings. Piper Sandler On AppLovin Analyst James Callahan reaffirmed an Overweight rating, while raising the price target from $400 to $575. AppLovin continues to execute well across its gaming and non-gaming verticals, while the latter is no longer limited to eCommerce, Callahan said. The company should witness "multiple years of revenue tailwinds from new verticals," he added. AppLovin announced its plans to sell off the lower-margin Apps segment, "which should simplify the story," the analyst stated. "Management reaffirmed that E-Commerce can be material in 2025," he wrote. Goldman Sachs On AppLovin Analyst Eric Sheridan reiterated a Neutral rating, while lifting the price target from $335 to $500. The company reported strong operating results and announced the divestiture of its apps (mobile gaming) business, which is likely to close in the second quarter, Sheridan said. "The company still sees technological advancements (driven by AI and the continued improvements in their AXON 2.0 platform) as driving multiple initiatives for 2025 that can widen the advertiser base, deepen advertiser budget growth, improve self-serve dynamics and result in more ads personalization over the medium/long-term," the analyst wrote. Oppenheimer On AppLovin Analyst Martin Yang maintained an Outperform rating, while raising the price target from $480 to $560. AppLovin has decided to expand beyond ecommerce, Yang said. "Its adtech solution works well not only for mid-market e-commerce brands, but also for companies in fintech, healthcare, automotive, and insurance, which have seen strong results in the pilot," the analyst wrote. The company will be rolling out a self-service dashboard powered by AI agents this year, "which will allow non-game business to scale faster across industries," he added. Needham On AppLovin Analyst Bernie McTernan reaffirmed a Hold rating on the stock. AppLovin generated advertising revenue "at elevated levels" for two consecutive quarters, with 17.5% growth in the third and 19.7% in the fourth quarter, McTernan said. Its ad revenue growth was "driven by underlying model improvements from the model getter smart, engineering improvements on the models and new verticals revenue helping to drive seasonal strength" The ad spend from new verticals in the fourth quarter suggest that the pilot program is "off to a strong start," the analyst stated. "The company is working on a gen-AI enabled self service platform that should accelerate new verticals revenue." APP Price Action: Shares of AppLovin had risen by 23.26% to $468.79 at the time of publication on Thursday. Read More: Applovin Emerges As Nasdaq 100's Dark Horse In A Market Fixated On Nvidia, Tesla, Palantir Photo: Shutterstock APPAppLovin Corp$458.1520.5%Overview Rating:Speculative50%Technicals Analysis660100Financials Analysis400100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs

AppLovin Stock Surged Nearly 30% After Earnings -- Watch These Key Price Levels

Investors should watch major support levels on AppLovin's chart around $290, $168, and $116. AppLovin (APP) shares soared nearly 30% higher in extend trading on Wednesday after the artificial intelligence (AI)-powered advertising platform topped Wall Street's fourth quarter earnings expectations and issued a better-than-expected current-quarter outlook. The company, whose software helps monetize gaming apps with targeted ads, projected first quarter revenue of between $1.36 billion and 1.39 billion, handily surpassing the $1.32 billion expected by analysts. Executives said $1 billion of net sales will come from AppLovin's advertising segment, adding that the company it still in the early stages of bolstering its AI models. AppLovin shares have jumped 17% since the start of the year as of Wednesday's close and soared more than 700% over the past 12 months amid surging demand for the company's AI-powered advertising system. Indeed, the price looks set to open sharply higher on Thursday, setting the stage for the stock's next move higher. To forecast an upside price target, investors can use the measured move technique, also know by chart watchers as the measuring principle. When applying the analysis to AppLovin's chart, we calculate the distance of the uptrend that immediately preceded the pennant in points and add that amount to the pattern's upper trendline. For example, we add $357 to $397, which projects an upside price target of $754, an area where investors may decide to lock in profits. During pullbacks, the stock could see an initially dip to around $290. This level on the chart may provide support near the pennant pattern's low, which closely aligns with the closing price of a weekly wide-ranging bar in early November. Selling below this level opens the door for a drop to around $168, a price where the shares may attract buying interest near the closely-watched 50-period moving average and a brief range of consolidation prior to last November's election-driven surge. Finally, a deeper correction in AppLovin shares could trigger a decline to lower support around $116. Investors who employ buy-and-hold strategies could seek entry points in this region near the stock's prominent November 2021 swing high. The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

AppLovin soars almost 30% on earnings, guidance beat

The stock jumped more than 700% in 2025, driving by profit growth from its artificial intelligence-powered ad system. AppLovin shares soared almost 30% in extended trading on Wednesday after the company reported earnings and revenue that sailed past analysts' estimates and issued better-than-expected guidance. Here's how the company performed compared with analysts' expectations, according to LSEG: Net income in the quarter more than tripled to $599.2 million, or $1.73 per share, from $172.3 million, or 51 cents per share, a year earlier, the company said in a statement. Revenue jumped 43% from $953.3 million a year earlier. AppLovin was the best-performing U.S. tech stock last year, soaring more than 700% driven by the company's artificial intelligence-powered advertising system. In 2023, AppLovin released the updated 2.0 version of its ad search engine called AXON, which helps put more targeted ads on the gaming apps the company owns and is also used by studios that license the technology. Advertising revenue climbed 73% in the quarter to almost $1 billion. The ad business was previously categorized as Software Platform. The company said it made the change because advertising accounts for "substantially all of the revenue in this segment." AppLovin said it expects first-quarter revenue of between $1.36 billion and 1.39 billion, exceeding the $1.32 billion average analyst estimate, according to LSEG. Over $1 billion of that will come from its advertising segment, as the company said it's "still in the early stages" of bolstering its AI models. "The roadmap ahead is filled with opportunities for iteration," the company said in its shareholder letter. "As we execute, we believe we can continue to drive value creation for our shareholders."