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Investing.com -- Scotiabank initiated coverage of AppLovin (NASDAQ:APP) Corp with a Sector Outperform rating and a $430 price target, arguing the mobile‑marketing specialist is widening its lead in performance advertising as its artificial‑intelligence tools scale beyond gaming.
The brokerage said AppLovin’s proprietary AXON engine, trained on more than $10 billion of historical ad spend, optimises campaigns in real time and forms a “vast moat to cross for new entrants.”
By allowing smaller e‑commerce brands onto its network, the company is tapping what Scotiabank (TSX:BNS) calls a potential “second core revenue vertical” worth more than $1 billion.
AppLovin’s core in‑app ad network and mediation platform already dominate mobile‑game marketing, the note said, and first‑party data collected through its software‑development kit help shield it from looming privacy regulations.
Scotiabank expects the company’s shift toward higher‑margin advertising to keep pushing a metric often dubbed the “Rule of 40”—revenue growth plus EBITDA margin—well above 100%.
Although the shares look expensive relative to sales, Scotiabank said they trade at what it sees as an attractive multiple of future earnings.
The $430 target values AppLovin at about 27 times forecast 2026 EBITDA and implies “plenty of further upside,” helped by a $1 billion buyback programme funded by strong cash flow.
The firm also highlighted three catalysts, including broader adoption of AXON across advertisers seeking conversion‑based campaigns, accelerating budget shifts from social‑media platforms toward AppLovin’s network; and continued insulation from data‑privacy changes because of the company’s on‑device footprint.
Key risks include rising competition in demand‑side platforms and potential regulatory shifts that could narrow AppLovin’s data advantage, the analysts said.
Still, they believe the company is “fundamentally reshaping the landscape of performance advertising” and is positioned to re‑rate higher as growth re‑accelerates.