Citi maintains $600 target on AppLovin stock with Buy rating

On Thursday, Citi reaffirmed its Buy rating and $600.00 price target for AppLovin Corp (NASDAQ:APP), a mobile technology company specializing in marketing software and consumer apps. The endorsement comes as the company, currently trading at $297.03, shows strong momentum with a 9.2% gain in the past week. According to InvestingPro data, analyst targets range from $105 to $650, reflecting diverse market opinions on this high-growth tech player that has delivered an impressive 321% return over the past year.

Citi’s analysis suggests that AppLovin’s practice of using its own Ads platform for its in-house game studios has not been accounted for as revenue within the Ads business segment. As AppLovin prepares to sell its game studios in the second half of 2025, the firm anticipates that the new owners will likely continue to utilize AppLovin’s advertising services. This transition is projected to generate a modest increase in revenue and adjusted EBITDA for AppLovin in the latter half of 2025 and subsequent years. The company has demonstrated strong execution with a 43.44% revenue growth in the last twelve months, reaching $4.7 billion. For deeper insights into AppLovin’s financial health and growth prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company’s valuation metrics and growth trajectory.

The firm’s scenario analysis estimates that this change could potentially yield approximately $75 million in additional annual revenue. This figure is just shy of the company’s estimated fourth-quarter 2024 eCommerce revenue. The financial institution’s projection is based on the assumption that the Ads platform will remain a preferred choice for the new studio owners, thus providing a continuous stream of income for AppLovin. With a market capitalization of $101 billion and strong profitability metrics, including a 75.22% gross margin, the company demonstrates robust operational efficiency.

AppLovin’s business model, which integrates its own Ads platform with its gaming studios, has been a key part of its growth strategy. The anticipated divestiture of these studios is a significant move for the company, and the continued partnership with the new owners could reinforce AppLovin’s revenue streams.

Citi’s reaffirmation of its Buy rating and price target reflects confidence in AppLovin’s strategic positioning and potential for sustained growth. The firm’s analysis points to a positive outlook for the company’s financial health, based on the expected benefits from the planned sale of its game studios and the ongoing use of its Ads platform.

In other recent news, AppLovin Corp has reported a 44% increase in overall fourth-quarter revenue, reaching nearly $1.4 billion, although its app revenue saw a slight decline of 1%, amounting to just over $376 million. The company is reportedly nearing a $900 million deal to sell its games unit to Tripledot Studios, aiming to focus more on advertising rather than game development. Jefferies has maintained its Buy rating on AppLovin, with a price target of $600, highlighting significant revenue growth and successful scaling of e-commerce advertisers on its platform. Bank of America Securities also reiterated a Buy rating with a $580 price target, emphasizing the company’s potential to capture a substantial share of digital ad spend.

Benchmark has added AppLovin to its Top Ideas List, citing growth catalysts such as AI-enhanced targeting in gaming and increased e-commerce advertising. The firm’s analysts also noted the potential for AppLovin’s buyback program to elevate earnings per share over the medium term. Additionally, AppLovin’s strategy to expand its ad inventory could unlock further monetization opportunities, particularly as more non-gaming ads are introduced. The company’s focus on both gaming and non-gaming segments positions it to leverage diverse revenue streams. These recent developments underscore AppLovin’s strategic initiatives and market opportunities that could drive its financial performance.

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