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On Thursday, Morgan Stanley (NYSE:MS) made a significant adjustment to its outlook on AppLovin Corp (NASDAQ:APP), upgrading the stock from Equal-weight to Overweight. However, the firm also revised its price target downwards to $350.00 from the previous $470.00. The change in rating comes as the analyst, Matthew Cost, recognized AppLovin's notable performance in the advertising technology sector, particularly within gaming ads, and its rapid expansion into non-gaming advertising. Currently trading at $274.96, AppLovin has demonstrated remarkable momentum with a 260% return over the past year. According to InvestingPro data, the company maintains a "GREAT" overall financial health score.
AppLovin has demonstrated a consistent ability to gain market share in gaming ads and has developed its non-gaming ad business at a pace that surpassed Morgan Stanley's initial projections. With impressive revenue growth of 43.4% and a robust gross profit margin of 75.2%, the company's fundamental performance remains strong. Despite these achievements, the stock has experienced a significant decline, dropping 46% since the fourth-quarter earnings report. Morgan Stanley sees this downturn as a buying opportunity, describing the company as ad tech's "best executor 'on sale'." InvestingPro analysis reveals 16 additional key insights about AppLovin's market position and growth potential.
The firm acknowledges the risks posed by the current macroeconomic environment and the possibility of further short-term declines. Nonetheless, they consider AppLovin to be one of the more resilient companies within their advertising coverage, attributing this to the company's high engagement with direct response budgets and its capacity to outperform the market through innovation.
Matthew Cost's analysis suggests that AppLovin's effective execution, solid fundamentals, and strong valuation support based on GAAP Price to Earnings—which is uncommon in small to mid-sized internet companies—provide a strong foundation for the stock's potential outperformance in the future. The revised price target reflects a more cautious outlook, but the upgrade in rating indicates a confidence in the company's ability to navigate through the current economic landscape.
In other recent news, AppLovin Corp announced the appointment of Maynard Webb to its Board of Directors. Webb, a prominent figure in the tech industry, will join the Audit Committee and Nominating and Corporate Governance Committee. Meanwhile, Ted Oberwager, another board member, will not seek re-election at the company's 2025 Annual Meeting. In a separate development, Jefferies analyst James Heaney adjusted AppLovin's price target to $460, down from $600, while maintaining a Buy rating. Heaney's positive outlook is based on feedback from AppLovin's e-commerce advertising platform, which reportedly performs on par with major platforms like YouTube and TikTok.
Additionally, Citi analysts have reaffirmed their Buy rating and a $600 price target for AppLovin, despite acknowledging a low probability of the company acquiring TikTok's international assets. They noted that such an acquisition could offer strategic benefits by enhancing AppLovin's machine learning capabilities and expanding its advertising reach. AppLovin has confirmed its interest in TikTok's assets outside of China, although the likelihood of acquisition remains slim. These recent developments reflect AppLovin's ongoing efforts to strengthen its leadership and explore potential growth opportunities in the digital advertising space.
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