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On Wednesday, BofA Securities affirmed its Buy rating on AppLovin Corp (NASDAQ:APP) shares with a steady price target of $580.00. The endorsement comes after BofA Securities analyst Omar Dessouky met with AppLovin’s CEO in New York City. Dessouky highlighted the company’s increasing ability to communicate its long-term growth strategy to investors, suggesting that market participants will soon recognize the company’s potential. According to InvestingPro data, AppLovin’s stock has shown remarkable performance with a 321.8% return over the past year, despite recent volatility that has led to an 18.9% decline in the past week.
Dessouky believes that the recent market conditions, characterized by a momentum unwind and multiple short seller reports, have created a favorable opportunity for investors to purchase shares of AppLovin. According to Dessouky, these factors have undervalued the company in comparison to its peers like Google (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META), despite AppLovin’s promising growth trajectory and profitability. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 2.19 and operates with moderate debt levels, while delivering an impressive 75.2% gross profit margin.
The analyst’s reiteration of the Buy rating is based on AppLovin’s perceived competitive edge in the in-app bidding industry and the vast digital advertising spend the company could potentially mediate. Dessouky’s confidence in the company stems from AppLovin’s unique position against larger technology firms and its ability to sustain a competitive advantage over the long term. Recent financial data supports this view, with revenue growing 43.4% in the last twelve months to $4.7 billion, while maintaining strong profitability with earnings per share of $4.53.
Furthermore, Dessouky’s valuation of AppLovin includes an expectation of more than a 50% compound annual growth rate (CAGR) in EBITDA over the next two years, based on BofA’s estimates. This growth rate is notably higher than that of most of AppLovin’s competitors. The $580 price objective is derived from a 35x enterprise value to estimated CY26 EBITDA multiple.
AppLovin, which operates in the mobile app ecosystem, has been recognized by BofA Securities as a "secular grower" at an early stage in its growth curve, suggesting that the company is well-positioned for future expansion in the digital advertising and software industries.
In other recent news, AppLovin reported a 44% increase in overall fourth-quarter revenue, reaching nearly $1.4 billion, although its app revenue saw a slight decline of 1% to just over $376 million. The company is nearing a $900 million deal to sell its games unit to Tripledot Studios, with the transaction expected to include $500 million in cash and $400 million in equity. AppLovin has also expanded its share repurchase program, authorizing an immediate $500 million for share buybacks, a move seen as a commitment to returning value to shareholders. Benchmark has added AppLovin to its Top Ideas List, citing growth catalysts such as AI-enhanced targeting and the expansion of e-commerce advertising. The firm also maintained a Buy rating with a price target of $525, defending AppLovin against recent short seller reports and emphasizing its adherence to industry regulations. These developments highlight AppLovin’s strategic shifts towards advertising and away from game development. The company’s focus on AI-driven advertising and potential expansion of ad inventory are seen as key drivers for future growth. AppLovin’s strategies are aimed at optimizing shareholder value amidst recent market fluctuations.
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