On Tuesday, Citi demonstrated a positive outlook on AppLovin Corp (NASDAQ:APP), raising its price target on the company's shares to $185.00, up from the previous target of $155.00. Alongside the new price target, Citi has maintained a Buy rating for the stock.
The adjustment in the price target comes as Citi revises its expectations for the company's share repurchase program, taking into account the current share price of AppLovin. The firm has also increased the target multiple from 25 times the forecasted 2025 free cash flow (FCF) to 30 times FCF. This change intends to bring AppLovin's valuation in line with its peers in the digital advertising sector.
In a statement regarding the updated valuation, Citi mentioned, "We are updating our share repurchase assumption to reflect APP's prevailing share price and are raising our target multiple from 25x 2025 FCF to 30x FCF to better align with APP's digital advertising peers. Following our update, our target price goes from $155 to $185. We maintain our Buy rating."
In other recent news, AppLovin Corp has been a focal point of several analyst adjustments. JPMorgan has significantly raised AppLovin's stock target to $160 and expects robust third-quarter results with a projected revenue of $1,135 million, a 31% year-over-year increase. BofA Securities has nearly doubled AppLovin's stock target to $210, citing the company's growth prospects following the introduction of its artificial intelligence engine, Axon 2.0.
In contrast, Goldman Sachs has downgraded AppLovin stock to neutral, setting a new price target of $147. HSBC has maintained a Buy rating for AppLovin, raising the stock target to $154.40, citing the company's growth momentum in the software platform sector.
These recent developments come on the back of AppLovin's Q2 results revealing a 44% increase in revenue, reaching $1.08 billion. For Q3, the company projects revenue between $1.115 billion and $1.135 billion, and adjusted EBITDA ranging from $630 million to $650 million. This news provides investors with a glimpse into the recent happenings surrounding AppLovin Corp.
InvestingPro Insights
AppLovin's recent performance aligns with Citi's bullish outlook. According to InvestingPro data, the company has shown impressive growth, with revenue increasing by 37.31% over the last twelve months as of Q2 2024. This growth is complemented by a strong profitability profile, with a gross profit margin of 71.8% and an operating income margin of 30.02% for the same period.
InvestingPro Tips highlight that AppLovin's management has been aggressively buying back shares, which supports Citi's revised expectations for the company's share repurchase program. Additionally, analysts anticipate sales growth in the current year, further reinforcing the positive outlook.
The stock's recent performance has been remarkable, with a 322.7% price total return over the past year and a 90.83% return in the last three months. This aligns with the InvestingPro Tip indicating a significant return over the last week and strong returns over various time frames.
It's worth noting that AppLovin is trading near its 52-week high, with its current price at 97.96% of that level. While this reflects strong investor confidence, the InvestingPro Tip suggesting the stock is in overbought territory based on RSI may warrant caution.
For investors seeking a more comprehensive analysis, InvestingPro offers 21 additional tips for AppLovin, providing a deeper understanding of the company's financial health and market position.
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