AppLovin (APP) currently presents a compelling investment opportunity, with Wall Street consensus estimates projecting a potential return of ~50% over the next 12 months—a rare and noteworthy forecast. While the stock’s momentum and strong financial growth are difficult to ignore, I remain slightly cautious due to the ongoing reputational and legal challenges facing the company. Nevertheless, given its solid fundamentals and a valuation that appears reasonable despite bullish sentiment, AppLovin merits serious consideration from investors. Following an insatiable 300% climb over the past twelve months, I remain stoutly Bullish on APP stock.
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Blockbuster Growth Sets the Foundation for World-Class Returns
In Q1 2025, AppLovin delivered revenue growth of 40% year-over-year, with earnings before interest, taxes, depreciation, and amortization (EBITDA) up by 83%. Advertising revenue surged by 71%, primarily driven by its AXON 2.0 AI platform. This demonstrates remarkable financial growth, resulting in a free cash flow of $826 million for the first quarter of 2025. As a result, management can comfortably repurchase $1.2 billion of its shares using its cash on hand and non-operating proceeds, such as the sale of its gaming portfolio to Tripledot.
The company’s forward non-GAAP price-to-earnings (P/E) ratio is only 38.5, compared to 24.5 for the sector. Compare this to the 127% forward diluted earnings per share growth the company is positioned for, against just 12% for the industry, and you can start to see the exceptional deal that AppLovin stock offers investors.
To further support this positive return horizon, consider that the stock’s 14-week Relative Strength Index (RSI) is currently at 53, indicating a relatively fair value that doesn’t indicate oversold or overbought conditions. The price is trading significantly above the 50-week moving average, but this is normal for high-growth stocks during an extended and heavy bull run. The only caveat here is that due to such bullish sentiment, the stock is prone to heavy volatility during any macroeconomic weakness or short-term business underperformance.
APP Investors Shouldn’t Ignore the Negative Catalysts
The potential for stock price volatility is heightened by ongoing class-action lawsuits against AppLovin, which involve allegations related to “forced” app installations via silent or misleading permissions, click spoofing tied to fraudulent attribution practices, and misrepresentation of AI-driven growth. While management has denied these claims, the legal proceedings are ongoing and are unlikely to be resolved quickly.
In a worst-case scenario, the outcomes could include substantial financial penalties, reputational harm, or even the risk of platform delisting, particularly if litigation extends into 2026 as expected. Given these uncertainties, it may be prudent to maintain a smaller portfolio allocation to AppLovin than would otherwise be justified by its financial performance alone. These legal and reputational risks are the primary reason I’m not currently invested, although I’m considering initiating a small position in the coming weeks.
Macro Tailwinds and Institutional Backing Boost AppLovin
The company’s impressive growth isn’t coming out of thin air. The digital and mobile advertising market is structurally strong, with global mobile ad spending projected to reach $447 billion in 2025 (an 11% year-over-year increase), and U.S. mobile ad spending expected to grow by ~30% in 2025, rising to $262.8 billion. Performance-driven ads, which are AppLovin’s specialty, are also resilient in economic downturns.
According to TipRanks’ hedge fund analysis tool, it’s clear that institutional interest in APP is growing.
Institutional interest in AppLovin has been notably strong. Prominent hedge funds, including Stanley Druckenmiller’s Duquesne and Chase Coleman’s Tiger Global, established sizable positions in Q1 2025. Additionally, Renaissance Technologies—widely regarded as one of the most successful quantitative funds, founded by Jim Simons and known for its exceptional long-term performance—boosted its holdings by approximately 68%.
While short-seller commentary continues to circulate, the conviction shown by these top-tier investors carries significant weight. This level of institutional backing is a key factor influencing my growing interest in initiating a position.
In a conservative bull case 12-month outcome, AppLovin will very likely have $11 in trailing 12-month normalized earnings per share. The current non-GAAP P/E ratio of 48 is likely to contract to approximately 45 due to moderating bottom-line growth. That puts a reasonable 12-month price target at $500. The current price is $340, so the implied upside is nearly 50%. That’s an incredible opportunity for investors with an opportunistic risk-on streak.
Is AppLovin a Good Stock to Buy?
On Wall Street, AppLovin has a consensus Strong Buy rating based on 15 Buys, three Holds, and zero Sells. The average APP price target is $515.69, indicating a 51% upside potential over the next 12 months.
This outlook is highly positive and reveals a truly world-class investment opportunity. That said, just because Wall Street is bullish, that doesn’t mean elements of the investment thesis can’t go awry. As I mentioned, the legal risks could impede returns, so I’ll only be holding the stock at 3–4% of my portfolio in light of these circumstances.
AppLovin Offers a Risk-On High-Alpha Bet on Digital Ads
I believe AppLovin has a realistic potential to deliver a 50% return over the next 12 months. However, given the likelihood of growth normalization and potentially lower returns beyond that period, it would be prudent to establish a take-profit target. My current plan, should I initiate a position, is to target an exit around $500, with the aim of reassessing the investment thesis by mid-2026.
With strong support from Wall Street analysts, significant backing from some of the most respected hedge funds, and a favorable macroeconomic backdrop, AppLovin stands out as a high-alpha opportunity. That said, investors should remain mindful of ongoing legal and reputational risks, which could materially affect performance. Overall, the setup is compelling, assuming the risks are carefully managed.