On Wednesday, Bank of America (BofA) reiterated its strong stance on AppLovin (NASDAQ: NASDAQ:APP), maintaining the company as a top pick for the year 2025. Despite a recent dip in the company's stock price, which was unexpected following a BofA note, analysts at the firm remain confident in the stock's potential.
AppLovin's shares have seen a remarkable increase over the past two years, soaring from $100 to $350 in just six months. According to InvestingPro data, the stock has delivered an impressive 739.92% return over the past year, with a market capitalization now reaching $110.72 billion.
The BofA team, including the analyst known as Omar, expressed surprise at the stock's decline in response to their previous day's note, given the stock's substantial growth historically. They highlighted that investors familiar with AppLovin's business model and growth story might also find the drop surprising. However, they suggested a broader perspective, considering the overall significant gains the stock has made. InvestingPro analysis indicates the company maintains strong fundamentals with a "GREAT" financial health score and robust revenue growth of 41.48% in the last twelve months.
Omar continues to advocate for AppLovin, reinforcing the company's position as a top pick in BofA's "Internet Year Ahead" report. The optimism is rooted in AppLovin's software growth, business performance, and the potential in e-commerce opportunities. The firm anticipates that these factors will contribute to the company's future success.
The focus on AppLovin by BofA underscores the company's impressive trajectory in the software and e-commerce sectors. With this strong endorsement, AppLovin remains a notable stock to watch in the coming years as per BofA's analysis.
Investors and market watchers will likely keep a close eye on AppLovin's performance, especially given the high expectations set by Bank of America's analysis and the stock's past performance. The reaffirmation of the stock as a top pick suggests continued confidence in AppLovin's market strategy and growth potential.
In other recent news, AppLovin has been the subject of various analyst reports.
Jefferies reaffirmed a Buy rating on AppLovin, citing the company's e-commerce initiatives and impressive 41.48% revenue growth over the last twelve months. They also raised their price target to $425. Meanwhile, BofA Securities maintained a Buy rating and a $375 price target, despite noting that the company's first-party gaming performance fell below Street expectations.
Piper Sandler also maintained an Overweight rating on AppLovin, highlighting the company's potential for achieving 20-30% growth targets by improving conversion rates. Loop Capital upgraded its price target on AppLovin shares to $450, emphasizing its promising growth outlook, particularly within its core gaming business.
AppLovin's third-quarter results showed a 39% year-over-year increase in revenue, reaching $1.2 billion. Projections for Q4 2024 revenue range between $1.24 billion and $1.26 billion, with adjusted EBITDA expectations of $740 million to $760 million. In a strategic move, AppLovin issued $3.55 billion in senior notes and secured a new $1 billion unsecured revolving credit facility with JPMorgan Chase (NYSE:JPM).
However, AppLovin has faced criticism for its business model, with some suggesting that its growth story is largely due to related party transactions and circular revenue run through a series of Cyprus-based, Belarusian-owned games studios. Despite these criticisms, AppLovin remains focused on its ad exchange model, which allows for optimal monetization of any game partnered with the company.
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