AppLovin Surges 116.9% Year-to-Date on Strong Earnings Outlook

AppLovin, a mobile app technology company, has seen its stock surge 116.9% year-to-date, driven by an 89.7% increase in its full-year earnings estimate, thanks to the success of its Axon 2 artificial intelligence-based advertising technology, which has accelerated revenue growth and expanded into web-based marketing and e-commerce. The company's strong financial performance, including a 47.9% year-over-year revenue increase, has earned it a Zacks Rank of 1 (Strong Buy) and a "Moderate Buy" consensus rating from analysts. This description focuses on the primary topic (AppLovin's stock surge), main entities (AppLovin, Axon 2), context (mobile app technology and advertising market), significant actions (earnings estimate increase, revenue growth), and objective details (financial performance, analyst ratings) that will guide the AI in creating an accurate visual representation of the article's content.

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Nitish Verma
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AppLovin Surges 116.9% Year-to-Date on Strong Earnings Outlook

AppLovin Surges 116.9% Year-to-Date on Strong Earnings Outlook

AppLovin Co. (NASDAQ: APP), a mobile app technology company, has outperformed the Business Services sector with a remarkable 116.9% year-to-date return. The company's strong performance is driven by an 89.7% increase in its full-year earnings estimate over the past 90 days, indicating improved analyst sentiment and a stronger earnings outlook. This has earned AppLovin a Zacks Rank of 1 (Strong Buy), a successful stock-picking model that emphasizes earnings estimates and estimate revisions.

Why this matters: The surge in AppLovin's stock price and earnings outlook has significant implications for the mobile advertising market, as it demonstrates the growing demand for AI-based advertising technology. As AppLovin expands into web-based marketing and e-commerce, its success could have a ripple effect on the broader digital marketing industry.

AppLovin reported revenues of $1.06 billion in the last reported quarter, representing a year-over-year change of 47.9%. EPS of $0.67 for the same period compares with $0.01 a year ago. The company beat consensus EPS estimates in each of the trailing four quarters and topped consensus revenue estimates each time over this period.

Several research firms have recently weighed in on APP. TheStreet raised shares of AppLovin from a "d" rating to a "c" rating on March 8th. Wedbush upped their price target on AppLovin from $87.00 to $100.00 and gave the stock an "outperform" rating on May 9th. UBS Group boosted their price objective on AppLovin from $46.00 to $55.00 and gave the stock a "neutral" rating on February 15th. BTIG Research lifted their price target on AppLovin from $87.00 to $100.00 and gave the company a "buy" rating on May 9th.

The company's impressive growth is underpinned by the success of its Axon 2 artificial intelligence (AI)-based advertising technology. AppLovin's revenue grew 48% to $1.06 billion in the first quarter, with software platform revenue soaring 91% to a record $678 million. The release of Axon 2 in Q2 last year has accelerated quarterly software platform revenue growth each quarter. AppLovin is benefiting from the expansion of the mobile advertising market and the continued adoption of real-time bidding.

AppLovin's financial performance has been stellar. Net income turned from a loss of $4.5 million to a profit of $236 million in Q1. Adjusted EBITDA doubled to $549 million. The company generated $393 million in operating cash flow and $388 million in free cash flow. AppLovin ended the quarter with $3.1 billion in net debt, which can be paid down with its strong cash flow growth.

Looking ahead, AppLovin plans to use Axon 2 to move into web-based marketing and e-commerce, with a new product launch aimed at the e-commerce vertical later this quarter. Management expects to grow the software platform business by 20% to 30% over the long term. Despite its nearly 400% rise over the past year, AppLovin trades at 6.5x forward sales and a forward P/E of around 18.6x, which is considered reasonably priced given its current and potential future growth.

AppLovin's Axon 2 technology has been transformative for the company, driving strong revenue and profitability growth. The stock has solid upside potential in the years ahead, making it an attractive growth stock to consider. Based on data from MarketBeat, AppLovin currently has a consensus rating of "Moderate Buy" and an average price target of $71.72.

Key Takeaways

  • AppLovin's stock has returned 116.9% YTD, outperforming the Business Services sector.
  • The company's earnings estimate has increased 89.7% in 90 days, earning it a Zacks Rank of 1 (Strong Buy).
  • AppLovin's revenue grew 47.9% YoY to $1.06 billion, with EPS of $0.67 beating consensus estimates.
  • Axon 2 AI-based advertising technology has driven growth, with software platform revenue up 91% to $678 million.
  • AppLovin plans to expand into web-based marketing and e-commerce, with a new product launch later this quarter.