Stock Analysis & Ideas

AppLovin: An Attractive Bet in Mobile App Technology Space

Story Highlights

AppLovin has earned a reputation in the mobile app technology space since it went public in 2021. A detailed discussion on this company will be interesting for investors seeking exposure in this market.

AppLovin Corporation (NASDAQ: APP) is a well-recognized company in the mobile app industry. The company’s software-based platform allows easy marketing and monetizing of apps offered by mobile app developers. It also offers free-to-play mobile games.

The company is headquartered in Palo Alto, CA. It was founded in July 2011 and became a member of the Nasdaq, after an initial public offering (IPO) of its shares, in April 2021.

AppLovin and KKR Denali Holdings L.P. sold 22.5 million and 2.5 million shares, respectively. The public offer price was $80 for each share. Through the IPO, the company raised $2 billion in gross proceeds (or nearly $1.75 billion in net proceeds), of which a part was used for repaying debts under a revolving credit facility.

On TipRanks, the stock has a Strong Buy consensus rating based on 12 Buys. APP’s average price target of $69.58 reflects upside potential of 98.91% from current levels.

A more detailed discussion on AppLovin’s price performance and growth prospects will help investors form an opinion about the stock.

Price Performance & Market Capitalization

AppLovin’s first trading date on the exchange was April 15, 2021. The stock’s opening price on the day was $70, down 12.5% from the IPO price, and the closing price was $65.20, reflecting an 18.5% decline from the IPO price. Since the IPO, shares of AppLovin have grown 50%.

It seems to be that hedge funds and retail investors have used the company’s weak share price for increasing their holdings in the stock. Per TipRanks tools, hedge funds have purchased 1.1 million shares of APP in the last quarter, and retail investors with holdings in APP have gone up by 1.3% in the last 30 days.

Presently, the company’s market capitalization stands at $13.2 billion.

Important Milestones

AppLovin has reported results for five quarters since it got listed on the exchange. The bottom-line results in all five quarters were below expectations. It is due to report results for the second quarter of 2022 in August 2022. The consensus estimate for second-quarter earnings is $0.15 per share.

In April 2022, AppLovin entered into a partnership with The Trade Desk (NASDAQ: TTD), a pioneer in the advertising technology market. The same month, the company acquired Wurl for $430 million, enhancing its penetration into the connected TV market.

In February 2022, AppLovin announced that its board of directors approved a $750 million share buyback program. Meanwhile, the company associated with HUMAN Security, Inc. to avoid invalid traffics on its platforms. In January 2022, it acquired the MoPub business of Twitter, Inc. (NYSE: TWTR) for $1.05 billion.

In December 2021, the company concluded a secondary offering of 7.5 million shares for $83 per share. Also, the company raised $1.5 billion through term loans in October 2021.

Growth Drivers & Projections

The company’s solid footprint in North and South America, Europe and Asia, and growth opportunities through partnerships and acquisitions enhance its investment appeal.

Solid offerings of software solutions, innovation capabilities, a huge number of daily active users, and high installs on the platforms are also advantageous for the company. AppLovin anticipates its total addressable market (TAM) to increase by 10.6% CAGR to $283 billion in 2024 from $189 billion in 2020.

For 2022, the company projects earnings before interest, tax, depreciation, and amortization (EBITDA) to be $1.2 billion, higher than the $1 billion expected earlier. The EBITDA margin is forecast to be in the mid-30% range versus the mid-20% stated previously.

Software revenue is forecast to be $1.14-$1.29 billion in 2022 and $2 billion in 2023. Notably, the software revenue was $674 million in 2021. Total revenues are forecast to be $3.14-$3.44 billion in 2022, up from $2.79 billion in 2021.

Opinions and Data

Four days ago, Tyler Parker of KeyBanc initiated coverage on APP stock with a Buy rating and a price target of $55 (57.23% upside potential).

Per the TipRanks tool, the total traffic to the company’s website increased 124.85% year-over-year for May 2022, 114.04% so far in Q2 of 2022, and 289.98% since the beginning of 2022. The increase in the company’s website traffic underpins its top-line prospects.

Conclusion

The increasing use and demand for mobile applications worldwide have widened the growth opportunities for AppLovin. This company could be attractive to investors who are looking for growth-investment stocks. The fall in the company’s share price could be used for gaining exposure to the stock.

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