TSX runs higher on rate cut expectations
On Thursday, Loop Capital Markets increased its price target on shares of AppLovin Corp (NASDAQ: NASDAQ:APP) to $650.00, up from the previous target of $450.00, while reiterating a Buy rating on the stock. The company’s momentum is evident in its remarkable performance, with InvestingPro data showing a 470% return over the past six months and a staggering 762% return over the last year. The firm’s analyst, Rob Sanderson, provided a positive outlook on the company, citing strong momentum and feedback from advertisers.
Sanderson expressed difficulty in finding flaws within the bullish argument for AppLovin, noting the company’s sustained enthusiasm in the market and the competitive race among analysts to set high sell-side targets. The company’s financial health appears robust, achieving a perfect Piotroski Score of 9 according to InvestingPro data, though technical indicators suggest the stock is currently in overbought territory. Despite potential skepticism regarding the stock’s rapid appreciation, the analyst reported continued positive feedback from advertisers and anticipates the company’s momentum to persist.
The analyst also addressed investor concerns about the sustainability of the company’s margin structure. With current EBITDA at $2.32 billion and revenue growth of 43.44% year-over-year, Sanderson suggested that comparing AppLovin’s gross revenue to that of Meta (NASDAQ:META) and other walled garden platforms, which own their underlying media, could provide a more accurate reflection. He pointed out that if AppLovin reported gross instead of net revenue, an 80% EBITDA margin would be closer to 20%. For deeper insights into AppLovin’s valuation metrics and peer comparisons, investors can access comprehensive analysis through InvestingPro’s detailed research reports.
Loop Capital’s revised price target considers fundamental questions about the size of the opportunity available to AppLovin, the speed at which it can scale, the defensibility of its competitive moat, and potential challenges to the firm’s optimistic view. Trading at a P/E ratio of 106.8 and with a market capitalization of $167.65 billion, Sanderson explained that over half of the price target revision is due to raised estimates, with the remainder stemming from an increase in the target multiple to 35 times EBITDA, up from 30 times. The adjustment reflects the significant EBITDA growth expected from AppLovin over the next three to five years, which the analyst believes warrants a higher multiple.
In other recent news, AppLovin Corp has seen a series of positive developments. The company reported impressive fourth-quarter 2024 earnings, with revenue reaching $1.37 billion, surpassing consensus estimates of $1.26 billion. Their AEBITDA also exceeded expectations, coming in at $848 million against predictions of $763 million. UBS noted a strong performance in the gaming sector and a significant uptake in e-commerce revenue, estimated at $50 million for the fourth quarter. AppLovin is planning to divest its apps business, a move expected to streamline operations and focus on core areas. Analysts from Citi, UBS, Benchmark, and Piper Sandler have raised their price targets for AppLovin, ranging from $525 to $630, while maintaining Buy ratings, citing continued growth potential. Goldman Sachs also increased its price target to $500 but maintained a Neutral rating, focusing on the company’s advertising revenue and technological advancements. Piper Sandler highlighted the potential for sustained revenue growth, driven by expansion into new verticals. These recent developments reflect optimism about AppLovin’s capacity to capitalize on future opportunities.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.