On Thursday, Jefferies resumed coverage on AppLovin Corp (NASDAQ:APP) with an optimistic outlook, upgrading the stock to a Buy rating and raising the price target to $93 from the previous $70. The firm's analysis suggests there is still room for the stock to grow, despite its significant year-to-date increase of 80%. The valuation of AppLovin's shares at 11 times the projected FY25 EBITDA is deemed inexpensive by the firm.
Jefferies' confidence in the stock is bolstered by the strong performance of AppLovin's Software Platform, which is expected to continue driving upward revisions. The firm's recent survey on mobile games ad tech indicates that AppLovin is expanding its market share, thanks to the success of its Axon 2.0 product, which has delivered improved return on investment for advertisers.
The raised price target is based on a sum-of-the-parts valuation, which suggests that AppLovin's stock could reach $93 per share. This valuation corresponds to a 14 times multiple on the forecasted FY25 EBITDA, which stands at a discount when compared to peers, after adjusting for growth.
While acknowledging the potential risk of a revenue slowdown in the second half of 2024 or 2025 due to challenging comparisons, Jefferies believes the current revenue estimates for that period are attainable. The firm points out that AppLovin currently has only about a 25% market share in mobile gaming user acquisition spend and has considerable potential to expand into verticals beyond gaming.
InvestingPro Insights
AppLovin Corporation (NASDAQ:APP) has been capturing the attention of investors and analysts alike with its robust performance and growth potential. According to recent InvestingPro data, the company boasts a market capitalization of $22.97 billion and a P/E ratio of 59.19 as of the last twelve months ending Q4 2023. This valuation is particularly noteworthy given the company's substantial revenue growth of 16.54% during the same period, highlighting its strong market position and operational efficiency.
Investors may find the InvestingPro Tips particularly useful when evaluating AppLovin's stock. Notably, the company is expected to see net income growth this year, which could be a driving force behind its stock performance. Additionally, the stock's high return over the last year, with an impressive 328.91% one-year price total return, reflects a strong market confidence in AppLovin's business model and growth trajectory.
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