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On Monday, Citi maintained a Buy rating on AppLovin Corp (NASDAQ:APP) and significantly increased the price target to $335 from the previous $185. The revised target price is a direct result of updated financial forecasts and valuation methods applied by the firm.
Citi's new valuation of AppLovin reflects an optimistic outlook on the company's future performance, particularly in terms of advertising revenue. The firm has adjusted its free cash flow (FCF) per share estimate for 2026 upward from $7.41 to $9.13, a move prompted by expectations of stronger ad revenue growth.
The analyst at Citi highlighted the reasons behind the new price target, citing a roll forward in valuation from 2025 to 2026, an increase in the FCF multiple from 30 times to 37 times, and an upward revision of ad revenue growth projections. The growth for ad revenue is now anticipated to be 29% for both 2025 and 2026, a jump from the previous estimates of 24% for 2025 and 21% for 2026.
AppLovin's robust ad revenue growth expectations are central to Citi's raised estimates and target. The firm's analysis suggests that the company is well-positioned to capitalize on market opportunities in the coming years, leading to a more bullish stance on the stock's potential.
In other recent news, AppLovin Corp demonstrated a strong financial performance in its third quarter, with revenue reaching $1.2 billion, a 39% increase year-over-year. The robust growth was primarily driven by the company's advertising network's exceptional performance within the gaming sector. Furthermore, revenues from AppLovin's Software (ETR:SOWGn) Platform surged by 66% compared to the same period last year, attributed to technological advancements in the AppDiscovery platform. Loop Capital upgraded its stock price target for AppLovin to $385.00, maintaining its Buy rating on the stock.
InvestingPro Insights
AppLovin Corp's recent performance aligns with Citi's bullish outlook. According to InvestingPro data, the company's revenue growth stands at an impressive 41.48% over the last twelve months as of Q3 2024, with quarterly revenue growth at 38.64%. This robust growth supports Citi's optimistic projections for ad revenue expansion.
InvestingPro Tips highlight that AppLovin's net income is expected to grow this year, and analysts anticipate sales growth in the current year, further reinforcing Citi's positive stance. The company's strong financial health is evident from its liquid assets exceeding short-term obligations, allowing it to operate with a moderate level of debt.
However, investors should note that AppLovin is trading at high valuation multiples across various metrics, including earnings, EBIT, EBITDA, and revenue. The stock's price-to-book ratio is particularly high at 106.63, reflecting market enthusiasm that aligns with Citi's increased price target.
For those seeking a more comprehensive analysis, InvestingPro offers 21 additional tips for AppLovin, providing a deeper understanding of the company's financial position and market performance.
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