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On Monday, Jefferies retained a positive stance on AppLovin Corp (NASDAQ:APP) with a Buy rating and a steady price target of $460.00. The firm’s optimism is fueled by the anticipated resilience of the gaming advertisement sector and successful engagement with e-commerce advertisers, which are expected to contribute to a stronger than anticipated revenue in Q1 and optimistic revenue guidance for Q2. With the company’s impressive 43.44% revenue growth and a robust gross profit margin of 75.22%, InvestingPro data shows APP trading above its calculated Fair Value, suggesting investors should carefully consider entry points.
The company’s analysis suggests that the advertising market remains robust, drawing from the healthy results posted by major players such as META (NASDAQ:META), GOOG, and RDDT. This counters initial concerns about potential weak Q2 guidance due to tariffs. A key driver for AppLovin’s performance is the addition of new advertisers, which is reportedly surpassing the forecasted rate of roughly 100 new advertisers per month. The company’s strong execution is reflected in its financial metrics, with InvestingPro showing a remarkable return on assets of 28.14% and a healthy current ratio of 2.19.
AppLovin has also shown to be a top spending channel for many brands involved in the e-commerce pilot, capturing over 10% of their total budgets. This positions the company favorably within the competitive landscape. Jefferies anticipates that if AppLovin can achieve over 60% year-over-year growth in advertising revenue for Q1 and project at least mid-single-digit percentage revenue growth quarter-over-quarter, the stock is likely to respond well. This would be a significant turnaround, especially considering the stock’s 40% decline since early February. With earnings scheduled for May 7, investors should note that InvestingPro has identified 18 additional key factors affecting APP’s performance, available in the comprehensive Pro Research Report.
The valuation of AppLovin stock at 22 times the forecasted FY26 EBITDA is deemed attractive by Jefferies, especially when compared to their projected 33% 4-year advertising EBITDA growth rate. This valuation suggests that the stock holds potential for investors, based on the current financial projections and market positioning. The stock currently trades at an EV/EBITDA multiple of 46.01x, with a beta of 2.39 indicating higher volatility than the market average.
In other recent news, AppLovin Corp has seen several significant developments. UBS has adjusted its price target for AppLovin to $450, maintaining a Buy rating, while Piper Sandler has lowered its target to $425, keeping an Overweight rating. Morgan Stanley (NYSE:MS) has upgraded AppLovin from Equal-weight to Overweight, despite reducing its price target to $350. These changes reflect varying analyses of AppLovin’s performance and potential in the advertising technology sector. The company has shown growth, particularly in gaming ads, and has expanded its non-gaming advertising. Additionally, AppLovin has appointed Maynard Webb to its Board of Directors, bringing extensive experience from his roles at companies like eBay (NASDAQ:EBAY) and Salesforce (NYSE:CRM). Webb’s appointment is part of AppLovin’s strategy to enhance its leadership team during a crucial growth phase. Furthermore, Ted Oberwager will not seek re-election at the 2025 Annual Meeting, although he will continue to serve until then. These developments highlight AppLovin’s ongoing efforts to strengthen its market position and leadership team.
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