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On Thursday, BofA Securities maintained a Buy rating on AppLovin Corp (NASDAQ:APP) with a steady price target of $580.00. The firm’s analyst, Omar Dessouky, provided a rationale for the target, basing it on a multiple of 35 times the enterprise value to estimated calendar year 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA). AppLovin’s shares experienced a downturn on February 26, dropping to $331 from a level above $500 the previous week. The stock currently trades at $319.35, with InvestingPro analysis indicating the stock is trading above its Fair Value. The company maintains strong fundamentals with a market capitalization of $106 billion and trailing twelve-month revenue of $4.71 billion. This decline brought the company’s valuation to 20 times its projected enterprise value to EBITDA for the calendar year 2026.
Dessouky highlighted that AppLovin should be trading at a significant premium compared to its peers, rather than at a discount. His forecast for the company projects an EBITDA compound annual growth rate (CAGR) of 51% through to the calendar year 2026, which is more than double the growth rate anticipated for high-growth software companies, large-cap rule of 40 software firms, AI beneficiaries, and large-scale online advertising companies. InvestingPro data shows impressive revenue growth of 43.44% and a perfect Piotroski Score of 9, indicating exceptional financial strength. Subscribers can access 16 additional ProTips and comprehensive valuation metrics in the Pro Research Report.
The analyst expects that any discount on AppLovin’s valuation due to the complexity of its business will diminish over time. This expectation is based on the belief that as the company continues to deliver strong financial performance and as new investors become more acquainted with the mobile advertising technology and its auction processes, the current undervaluation will correct itself.
AppLovin, which specializes in mobile advertising technology, has been under the scrutiny of investors who are trying to understand the intricacies of the mobile adtech market. The company’s performance and the evolving industry dynamics will continue to be watched closely by investors and analysts alike.
In other recent news, AppLovin has been at the center of multiple significant developments. The company faced allegations from short reports by Fuzzy Panda Research and Culper Research, accusing it of deceptive practices such as "Ad Fraud" and potentially illegal activities, including data theft from Meta Platforms (NASDAQ:META) and violations of app store policies. In response, CEO Adam Foroughi defended the company, emphasizing its compliance with App Store policies and the legitimacy of its business model. Despite the allegations, Foroughi highlighted the success of their e-commerce pilot, which achieved a run rate of approximately $1 billion a year in gross advertiser spend.
Additionally, AppLovin’s stock has been scrutinized by Bear Cave, which raised concerns about the sustainability of the company’s rapid growth and the nature of its revenue streams. Despite these challenges, Loop Capital Markets increased its price target for AppLovin to $650, maintaining a Buy rating due to strong momentum and positive feedback from advertisers. Similarly, Citi analysts raised their price target to $600, expressing confidence in AppLovin’s future performance and minimal risks in the coming years. These recent developments reflect a complex situation for AppLovin, with both challenges and optimistic analyst perspectives shaping the narrative.
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