Scotiabank initiates AppLovin stock coverage with Outperform rating

Investing.com - Scotiabank (TSX:BNS) initiated coverage on AppLovin Corp (NASDAQ:APP) with a Sector Outperform rating and a $430.00 price target on Tuesday. The target sits within the current analyst range of $250-$650, with InvestingPro data showing the company commands a substantial market capitalization of $116.7 billion.

The bank cited AppLovin’s exceptional performance metrics, noting the company has "blown through the Rule of 40 into the triple digits" with its combined EBITDA margin plus revenue growth continuing to increase as the company gains efficiency. InvestingPro data reveals impressive fundamentals, including a 77.7% gross profit margin and robust revenue growth of 41.6% over the last twelve months, with EBITDA reaching $2.8 billion.

Scotiabank identified three key investment highlights for AppLovin: the company’s AXON engine creating a significant competitive moat, its recent decision to allow smaller brands access to its network, and its insulation from regulatory changes due to first-party data and broad device footprint.

The firm recognized AppLovin as the established leader in mobile app marketing, particularly within gaming, operating one of the largest in-app ad networks and mediation platforms globally.

While acknowledging that AppLovin appears expensive based on sales metrics, Scotiabank believes there is "plenty of further upside" to share prices when evaluated on EBITDA, especially as the company "fundamentally reshapes the landscape of performance advertising."

In other recent news, Datadog (NASDAQ:DDOG) has been announced as a new addition to the S&P 500 index, replacing Juniper Networks (NYSE:JNPR) following its acquisition by Hewlett Packard Enterprise (NYSE:HPE). The inclusion in this benchmark index is a significant development, reflecting Datadog’s increased market capitalization and liquidity. Meanwhile, AppLovin completed the sale of its mobile gaming subsidiaries to Tripledot Group Holdings for $400 million in cash and an equity stake, marking a strategic move for the company. In related developments, Piper Sandler raised its price target for AppLovin to $470, maintaining an Overweight rating, citing strength in the company’s total supply growth despite some mixed trends. Morgan Stanley (NYSE:MS) also increased its price target for AppLovin to $460, highlighting the potential value enhancement from selling its apps segment. These changes come amidst the S&P Dow Jones Indices’ decision to keep the S&P 500 membership unchanged, impacting companies like Robinhood (NASDAQ:HOOD) and AppLovin, which saw their shares fall.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.