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Investing.com -- Wedbush reiterated its Outperform rating on AppLovin, lifting its price target for the stock to $725 from $620 in a note on Friday, citing continued strength in gaming, e-commerce expansion, and upcoming product launches.
“AppLovin has repeatedly proven that its phenomenal growth will continue for the foreseeable future, and at a staggering profit margin,” Wedbush analysts wrote.
They expect momentum in gaming and “increased spending on user acquisition (UA), and layering in ecommerce” to boost results this year.
According to Wedbush, UA spending on mobile games totals more than $30 billion annually, with the portion spent on third-party games nearly tripling in recent years to about $15 billion.
The firm said it expects the UA market to keep growing, aided by the Apple vs. Epic case, which is “likely becoming a tailwind for AppLovin next year.”
The analysts flagged key near-term catalysts, including AppLovin’s international expansion in late Q3 and the launch of its self-serve tool on October 1.
They added that “AXON 2.0 should maintain its leadership, with 20 – 30% annual growth easily achievable through market growth.”
Wedbush said its new price target is based on an EV/EBITDA multiple of 37x on 2027 estimates and views current forecasts as conservative.
“A combination of ecommerce success and web store migration should drive significant growth for at least the next three years,” the note said.
The firm also emphasised AppLovin’s advantages in performance marketing, noting: “We believe AppLovin’s moat is securee; even as competitors will ultimately close the gap toward its proprietary technology. AppLovin’s training data will have learned exponentially more over that time, creating a vast delta in its performance capability vs. peers.”
Wedbush concluded that AppLovin is positioned to sustain “20 – 30% top-line growth” with margins of 80–85%, supported by both demand and supply expansion in mobile gaming.