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On Friday, Jefferies reasserted a positive stance on AppLovin Corp (NASDAQ:APP), maintaining both a Buy rating and a $600.00 price target. The firm’s confidence in AppLovin, currently valued at $92.47 billion, is supported by significant revenue growth of 43.44% and the successful scaling of e-commerce advertisers on the platform. According to InvestingPro data, analyst targets for APP range from $105 to $650, reflecting diverse market expectations for this high-growth tech company.
The analyst from Jefferies highlighted the importance of the revenue generated through advertising on AppLovin’s platform, noting a 75% increase in advertising revenues in 2024. This growth is a testament to the effectiveness of the platform, with AppLovin’s customers continuing to see value in the service provided. The company’s impressive 36% five-year revenue CAGR and "GREAT" financial health score from InvestingPro underscore its strong market position. The advertising revenue is a key indicator of the platform’s success, as it demonstrates the tangible benefits to customers.
Northbeam, a direct-to-consumer e-commerce ad measurement company, released an in-depth analysis of AppLovin, observing that its e-commerce share is on par with major platforms like TikTok and YouTube. Notably, customer acquisition costs on AppLovin have remained stable since Black Friday, while return on ad spend, conversion rates, and click-through rates have all shown improvement since December.
AppLovin has ended December with 600 e-commerce web advertisers, reaching a gross spend run-rate of over $1 billion. The company aims to enhance ad targeting efficiency and onboard more web advertisers to further increase expenditure in 2025. Although the pace of advertiser growth is expected to be slower in the first half of 2025 due to manual onboarding processes, the holiday season of 2025 is anticipated to be a pivotal moment for growth.
The analyst emphasized the value of demand data over supply data, explaining that the auction winner gains exclusive insights into user interactions with ads. AppLovin’s competitive edge is fortified by its extensive data accumulated from numerous winning bids over the years, combined with sophisticated targeting models and continuous reinforcement learning.
AppLovin is also optimistic about the growth of its supply network, MAX, which is a significant revenue generator in its own right. The company benefits from not having to pay a take-rate to itself on the demand side, protection against low bids from competitors, and control over a larger share of market growth, especially in e-commerce and web domains.
The platform’s strategy includes leveraging the growth in mobile game ad supply to positively influence the total addressable market for mobile gaming and, by extension, its own ad demand business. Currently, AppLovin fills the supply it purchases with 5%-10% of e-commerce/web ads, aiming to reach 80% as the ecosystem evolves. With a strong current ratio of 2.19 and robust gross profit margin of 75.22%, InvestingPro analysis suggests the company has the financial flexibility to execute its growth strategy, though investors should note the stock’s high volatility with a beta of 2.33. For deeper insights into AppLovin’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, AppLovin has been in the spotlight due to several significant developments. The company reported a 44% increase in overall fourth-quarter revenue, reaching nearly $1.4 billion, although app revenue saw a slight decline of 1% to just over $376 million. AppLovin is reportedly nearing a $900 million deal to sell its games unit to Tripledot Studios, aiming to focus more on advertising. Bank of America Securities maintained a Buy rating for AppLovin, with a price target of $580, following a meeting with the company’s CEO. The analyst highlighted the company’s competitive advantages and potential for growth in digital advertising.
Benchmark added AppLovin to its Top Ideas List, citing growth catalysts like AI-enhanced targeting and e-commerce advertising. Additionally, AppLovin announced a $500 million share buyback plan, signaling confidence in its financial health. The buyback program is intended to return value to shareholders and stabilize the stock amid recent market volatility. These developments reflect AppLovin’s strategic initiatives to strengthen its market position and explore new revenue streams.
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