On Tuesday, Loop Capital initiated coverage on AppLovin Corp (NASDAQ:APP) stock, setting a Buy rating and a price target of $181.00. The firm highlighted the company's key role in the mobile gaming sector and its effective use of big data and artificial intelligence as factors contributing to its positive outlook.
According to Loop Capital, AppLovin has recently gained recognition, breaking out after being relatively undiscovered and misunderstood. The firm acknowledges the stock's rapid price increase and suggests that while it would welcome a pullback to buy more shares, the revaluation of the stock is seen as sustainable. Loop Capital believes there is still a significant growth opportunity for AppLovin within its primary focus area.
Loop Capital sees the potential for AppLovin's expansion into ecommerce advertising as an additional growth lever, which could amplify the company's total addressable market (TAM). This expansion is considered an upside to the firm's current outlook.
The firm also draws comparisons between AppLovin and The Trade Desk (NASDAQ:TTD), noting AppLovin's larger software business size, faster growth rate, and higher margins. While The Trade Desk trades at 20 times sales and 48 times EBITDA based on 2025 consensus, AppLovin is currently trading at 10 times sales and 18 times EBITDA, suggesting a favorable valuation for AppLovin in the eyes of Loop Capital.
Loop Capital's initiation of coverage with a Buy rating reflects its confidence in AppLovin's sustained growth and central role in the mobile gaming industry, coupled with the potential for expansion into new advertising markets.
In other recent news, AppLovin Corp has been the subject of numerous analyst adjustments. BofA Securities nearly doubled AppLovin's stock price target to $210, retaining a Buy rating, due to the company's growth prospects following the introduction of its artificial intelligence engine, Axon 2.0.
Goldman Sachs, however, downgraded AppLovin stock to neutral, setting a new price target of $147, despite an upward revision of the company's Q3 revenue projections for 2024.
HSBC maintained a Buy rating for AppLovin, raising the stock target to $154.40, citing the company's growth momentum in the software platform sector and its expansion into online retail advertising. Macquarie also maintained an Outperform rating, increasing its price target to $150, acknowledging AppLovin's significant growth and higher margins.
Citi raised its price target for AppLovin to $155, maintaining a Buy rating, due to increased confidence in the company's potential for software revenue growth. UBS upgraded AppLovin's stock from Neutral to Buy, setting a new price target of $145, based on the company's improved visibility into medium-term revenue growth.
Despite these positive assessments, Benchmark maintained a sell rating, raising its price target to $66, citing potential challenges. AppLovin's Q2 financial results showed strong performance, with a 44% increase in revenue to $1.08 billion.
The company's future guidance predicts Q3 revenue between $1.115 billion and $1.135 billion, and adjusted EBITDA ranging from $630 million to $650 million. These recent developments indicate a robust future for AppLovin, underpinned by solid fundamentals and a strong position within its industry.
InvestingPro Insights
AppLovin's recent performance aligns with Loop Capital's bullish outlook. According to InvestingPro data, the company's revenue growth stands at an impressive 37.31% for the last twelve months as of Q2 2024, with quarterly revenue growth reaching 43.98% in Q2 2024. This robust growth supports Loop Capital's view on AppLovin's significant market opportunity.
The company's profitability is also noteworthy, with an operating income margin of 30.02% and an EBITDA growth of 121.63% for the last twelve months as of Q2 2024. These figures underscore AppLovin's ability to efficiently convert revenue into profit, a key factor in its attractiveness to investors.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, further reinforcing Loop Capital's positive stance. Additionally, the stock has shown a strong return over the last month, with a 25.98% price increase, and an even more impressive 90.83% return over the last three months.
It's worth noting that AppLovin is trading near its 52-week high, with its current price at 99.4% of the 52-week high. This aligns with Loop Capital's observation of the stock's recent breakout and revaluation.
For investors seeking 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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