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On Thursday, Piper Sandler adjusted its outlook for AppLovin Corp (NASDAQ:APP), reducing the price target to $425 from the previous $575, while maintaining an Overweight rating on the stock. The company, currently trading at $274.96, has demonstrated remarkable performance with a 260% return over the past year, though InvestingPro analysis suggests the stock is trading above its Fair Value. The reassessment by the firm is based on a combination of proprietary analysis and market data that suggests AppLovin is gaining supply-side share. Notably, AppLovin has seen mobile gaming share increases, particularly through Zynga (NASDAQ:ZNGA), with sellers.json data showing a significant 35% year-over-year increase in March, outpacing its peers.
Piper Sandler's research indicates that AppLovin's advertising platform is benefiting from the addition of new supply partners. The company's impressive 43.44% revenue growth and strong gross profit margin of 75.22% reflect this expansion. In the first quarter, approximately 330 new supply partners were added, in contrast to Unity Ads, which saw a reduction of about 130 partners. IronSource, another competitor, added roughly 120 partners. These changes are seen as indicative of future demand trends, as full mediation of a publisher's own apps is essential for utilizing Return on Ad Spend (ROAS) or blended bidding strategies.
The firm also highlighted the importance of mediation growth for AppLovin, which is expected to create a more balanced competitive environment compared to other providers that may self-preference. With a robust current ratio of 2.19 and an impressive Altman Z-Score of 15.91, InvestingPro data shows the company is well-positioned financially to execute its growth strategy. Moreover, Piper Sandler's ad buyer observed that AppLovin's performance-driven model is likely to be more resistant to market uncertainties compared to its peers. This is particularly relevant given the current tariff discussions, as gaming is anticipated to be less affected and may benefit from increased time spent as a more economical option compared to other entertainment forms.Want deeper insights? InvestingPro subscribers have access to 18 additional ProTips and comprehensive financial metrics for APP, along with expert analysis in the Pro Research Report.
Despite potential impacts on E-Commerce clients due to tariffs, the firm believes that AppLovin's growth in advertiser count could help counterbalance any declines in Average Revenue Per User (ARPU). The new price target reflects a revised multiple of approximately 30 times the forecasted FY2 EBITDA, with no amendments to their earnings estimates for the company. With analysts forecasting EPS of $8.25 for FY2025 and targets ranging from $105 to $650, Piper Sandler reaffirmed its Overweight rating, signaling continued confidence in AppLovin's prospects.
In other recent news, AppLovin Corp has made significant moves in the advertising technology sector. Morgan Stanley (NYSE:MS) upgraded AppLovin's stock rating from Equal-weight to Overweight, citing the company's strong performance in gaming ads and expansion into non-gaming advertising. Despite this upgrade, Morgan Stanley reduced its price target for the company to $350 from $470, reflecting a more cautious outlook amid macroeconomic challenges. Meanwhile, Jefferies maintained a Buy rating on AppLovin, adjusting the price target to $460 from $600, based on positive feedback from its e-commerce advertising platform.
In addition, AppLovin announced the appointment of Maynard Webb to its Board of Directors. Webb, who brings extensive experience from his roles at major technology companies like eBay (NASDAQ:EBAY) and LiveOps, will also serve on the Audit and Nominating and Corporate Governance Committees. The company confirmed that Ted Oberwager will not seek re-election at the 2025 Annual Meeting but will remain on the board until then. These developments come as AppLovin continues to refine its leadership team and strategy.
Analysts from both Morgan Stanley and Jefferies see potential in AppLovin's future performance, with Jefferies highlighting anticipated revenue growth as a potential catalyst for the stock. AppLovin's leadership changes and strategic focus appear to align with its growth ambitions in the advertising technology space.
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