On Monday, Loop Capital updated its stance on shares of AppLovin Corp (NASDAQ:APP), a company specializing in mobile app development and marketing. The firm raised its price target on the stock to $450 from the previous $385 while maintaining a Buy rating.
The adjustment follows a week where AppLovin's shares experienced a 19% decline, contrasting with a minor 1% drop in the S&P 500. The decrease was attributed to the company's non-inclusion in a major stock index.
The analyst at Loop Capital believes that AppLovin is poised to become one of the top growth stocks in 2025. The firm cites the recent market pullback as a potentially advantageous moment for investors to acquire shares during the current upswing.
Despite the volatility associated with such a rapidly revalued momentum stock, Loop Capital remains confident in AppLovin's growth prospects, especially within its core gaming business. This confidence appears supported by the company's recent performance, with revenue growing 41.48% in the last twelve months and maintaining strong profitability with a 73.89% gross margin.
Further optimism is drawn from preliminary channel feedback, suggesting that AppLovin's earnings from ecommerce advertisers are on the brink of substantial growth. Loop Capital has accordingly raised its estimates for non-gaming revenue contributions, noting that even with these adjustments, their projections remain conservative compared to their base case scenario analysis.
The new price target of $450 is based on the same valuation framework as before, applying a 30-times multiple to the firm's projected 2026 adjusted EBITDA from AppLovin's advertising business. Loop Capital's analyst encourages long-term growth investors to capitalize on the recent sell-off to build or increase their positions in AppLovin, reiterating a Buy rating on the stock.
In other recent news, AppLovin Corp has been the focus of numerous financial firms. Oppenheimer maintained an Outperform rating and a price target of $480, viewing the recent 15% decline in AppLovin's stock price as an attractive entry point for investors.
The firm's analysis suggests AppLovin operates with moderate debt levels and maintains liquid assets exceeding short-term obligations. Stifel raised its price target for AppLovin to $435, maintaining a "Buy" rating, while Piper Sandler kept an "Overweight" rating with a price target of $400.
AppLovin's recent financial maneuvers include issuing $3.55 billion in senior notes and securing a new $1 billion unsecured revolving credit facility with JPMorgan Chase (NYSE:JPM). These moves are part of a strategy to repay existing senior secured term loan facilities due in 2028 and 2030.
The company's third-quarter results showcased a 39% year-over-year increase in revenue, reaching $1.2 billion. AppLovin is transitioning to an all unsecured debt capital structure following investment grade ratings from S&P Global Ratings and Fitch Ratings.
Projections for Q4 2024 revenue are between $1.24 billion and $1.26 billion, with adjusted EBITDA expectations of $740 million to $760 million. These recent developments highlight AppLovin's financial health and growth prospects, reflecting the confidence of several financial firms in the company's future trajectory.
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