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On Monday, Citi analysts upheld their Buy rating and a $600.00 price target for AppLovin Corp (NASDAQ:APP) shares, following the company’s recent interest in acquiring TikTok’s assets outside of China. With a market capitalization of $89 billion and an impressive 260% return over the past year, AppLovin has shown remarkable growth momentum. According to InvestingPro analysis, the company maintains a GREAT financial health score, suggesting strong fundamentals. Citi’s analysis suggests that while the likelihood of AppLovin successfully purchasing TikTok, even just the U.S. assets, is "far below 1%," the strategic rationale behind such a move could be beneficial for the company.
AppLovin, known for its mobile marketing platform, filed an 8K with the Securities and Exchange Commission, confirming its interest in TikTok’s international assets. The company’s strong financial position, with a current ratio of 2.19 and robust revenue growth of 43.4% in the last twelve months, positions it well for strategic moves. According to Citi, there is no indication that TikTok’s non-U.S. assets are on the market, and with significant competition for the U.S. portion, the chances of AppLovin acquiring any part of TikTok are minimal.
Despite the low probability of acquisition, Citi analysts see several strategic advantages for AppLovin if the merger were to occur. The addition of TikTok could potentially expedite AppLovin’s expansion into non-gaming advertising categories. Furthermore, access to TikTok’s data could enhance AppLovin’s proprietary machine learning model, Axon, and owning the advertising inventory might also reduce any AdTech discount, potentially improving the company’s valuation multiples. For deeper insights into AppLovin’s valuation and growth potential, InvestingPro subscribers can access exclusive analysis and 19 additional ProTips about the company’s performance and outlook.
The impact on AppLovin’s free cash flow per share from a potential TikTok acquisition is uncertain, hinging on various unknowns, including TikTok’s adjusted EBITDA margins. Citi’s comments reflect a comprehensive look at the possible outcomes of such a deal, weighing both the strategic fit and the financial implications for AppLovin.
AppLovin’s filing and the subsequent analysis by Citi come amidst a broader industry context where tech companies are seeking to diversify their user base and reduce risks associated with the advertising technology sector. The company’s interest in TikTok underscores a desire to leverage popular platforms to bolster its position in the digital advertising space.
In other recent news, AppLovin Corporation has expressed interest in acquiring TikTok’s operations outside of China, as disclosed in a recent SEC filing. This potential acquisition, which remains in preliminary stages, would require regulatory approval and could significantly expand AppLovin’s business scope. Meanwhile, Benchmark analysts have maintained a Buy rating on AppLovin with a price target of $525, emphasizing the company’s growth potential and transparency. In response to recent short report activity, AppLovin has hired the law firm Quinn Emanuel Urquhart & Sullivan to conduct an independent investigation, underscoring its commitment to transparency and integrity.
Furthermore, FBN Securities has initiated coverage of AppLovin with an Outperform rating and a $385 price target, citing the company’s strong market position and growth strategy. The analysts at FBN Securities highlighted AppLovin’s initiatives in mobile gaming and its expansion into direct-to-consumer and e-commerce markets. CEO Adam Foroughi has addressed concerns raised by short sellers, reassuring investors of the company’s solid foundation and growth prospects. AppLovin’s proactive measures to counteract the short report activity demonstrate its dedication to maintaining market trust and protecting stakeholder interests.
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