On Thursday, BTIG adjusted its outlook on AppLovin Corp (NASDAQ:APP) shares, increasing the price target to $100 from the previous $87, while reiterating a Buy rating on the stock.
The decision follows AppLovin's first-quarter results for 2024, which surpassed both consensus expectations and a higher buy-side forecast, primarily due to robust AppDiscovery trends and an uptick in MAX from bidded mix shifts.
The company's software segment reported a significant beat, with revenues reaching $678 million against BTIG's estimate of $614 million. Analysis of the quarter's performance suggests approximately 90% of the $102 million quarter-over-quarter revenue increase was driven by AppDiscovery.
Notably, this growth was attributed to increased gross spend from existing gaming customers, rather than new developer acquisitions. This outcome challenges the prior assumption that software growth in 2024 would rely heavily on capturing budgets from larger studios.
The positive results from the gaming sector have led to a more optimistic view of the gaming total addressable market (TAM). BTIG highlights that a high ROI performance marketing model is proving effective in unlocking spending and TAM potential spontaneously. Moreover, the opportunity for AppLovin to engage with larger studios later in the year remains open.
Despite less immediate pressure on AppLovin's eCommerce business, progress is evident, with BTIG expressing increased confidence in the company's channel extension capabilities.
This confidence is bolstered by developments in Flip and Axon Connect and an increase in non-gaming client spending on AppDiscovery. These factors are contributing to the build-out of the data needed for AppLovin to deliver competitive performance in new channels.
In summary, BTIG's revised estimates for AppLovin in 2024 are significantly higher, leading to an upward adjustment of the price target. The firm maintains a strong conviction in AppLovin's potential, designating it as a BTIG Top Pick and acknowledging the possibility for further outperformance against forecasts in the current and following year.
InvestingPro Insights
AppLovin Corp's (NASDAQ:APP) recent performance has certainly caught the eye of investors and analysts alike. With the company's share price reflecting a strong return over the last year, up by an impressive 327.01%, it's important to consider the underlying financial metrics that may be driving this growth. The company's revenue growth is particularly notable, with a 24.72% increase in the last twelve months as of Q1 2024, and an even more substantial quarterly revenue growth of 47.9% in Q1 2024.
InvestingPro Tips highlight that AppLovin is trading at a low P/E ratio relative to near-term earnings growth, with an adjusted P/E ratio of 38.86 as of Q1 2024, suggesting that the stock may be undervalued given its growth prospects. Additionally, with a PEG Ratio of just 0.24 in the same period, it indicates a potential for a higher earnings growth rate compared to its P/E ratio. This could be an attractive point for investors looking for growth at a reasonable price.
For those considering an investment in AppLovin, it's worth noting that analysts predict the company will be profitable this year, and management has been aggressively buying back shares, which can be a sign of confidence in the company's future. To explore more about AppLovin's financial health and future prospects, including additional InvestingPro Tips, visit https://www.investing.com/pro/APP. And remember, readers can take advantage of an additional 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24. With 14 more InvestingPro Tips available, investors can gain a comprehensive understanding of where AppLovin stands in the market.
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