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AppLovin (APP)
NASDAQ:APP
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AppLovin
(NASDAQ:APP)
72Outperform
Positive Factors
Competitive Advantage
AppLovin possesses a competitive advantage due to proprietary training data, allowing it to outbid major competitors like Google and Meta in auctions.
Market Expansion
AppLovin is expanding beyond mobile gaming advertising into industries like ecommerce.
Revenue Growth
AppLovin's revenue from advertising is a key proof-point, with ad revenues up 75%, indicating strong performance and customer retention.
Negative Factors
Operational Challenges
The primary near-term limitation to adding eCommerce clients is a hesitation to hire staffing to onboard these new clients.
Valuation Concerns
The prevailing equity value (of $260) suggests the market is ascribing a ~50% likelihood that AppLovin’s equity is worth $0, which seems remarkably high given the company's performance.
AppLovin (APP) vs. S&P 500 (SPY)
Market Cap
$106.76B
Dividend YieldN/A
Average Volume (3M)10.56M
Price to Earnings (P/E)69.2
Beta (1Y)3.52
Revenue Growth43.44%
EPS Growth351.19%
CountryUS
Employees1,533
SectorTechnology
Sector Strength51
IndustrySoftware - Application
Share Statistics
EPS (TTM)4.54
Shares Outstanding309,269,680
10 Day Avg. Volume10,195,262
30 Day Avg. Volume10,555,956
Financial Highlights & Ratios
PEG Ratio0.20
Price to Book (P/B)N/A
Price to Sales (P/S)24.89
Price to Cash Flow (P/CF)48.50
P/FCF Ratio48.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$537.36Price Target Upside71.12% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering17
AppLovin Business Overview & Revenue Model
Company DescriptionAppLovin Corporation engages in building a software-based platform for mobile app developers to enhance the marketing and monetization of their apps in the United States and internationally. The company's software solutions include AppDiscovery, a marketing software solution, which matches advertiser demand with publisher supply through auctions; Adjust, an analytics platform that helps marketers grow their mobile apps with solutions for measuring, optimizing campaigns, and protecting user data; and MAX, an in-app bidding software that optimizes the value of an app's advertising inventory by running a real-time competitive auction. Its business clients include various advertisers, publishers, internet platforms, and others. The company was incorporated in 2011 and is headquartered in Palo Alto, California.
How the Company Makes MoneyAppLovin makes money primarily through its two main business segments: Software Platform and Apps. The Software Platform segment generates revenue by providing app developers with tools for user acquisition, monetization, and analytics, primarily through its proprietary software solutions that facilitate data-driven marketing and ad placement. The Apps segment derives revenue from mobile gaming, earning money through in-app purchases and advertising within its own games or those developed by partner studios. Key revenue streams include fees from developers using its platform and advertising revenue generated from its gaming portfolio. Partnerships with app developers and advertisers play a significant role in driving earnings by expanding the reach and effectiveness of its platform and games.
AppLovin Financial Statement Overview
Summary
AppLovin demonstrates solid financial performance characterized by strong revenue and profit growth, improving profitability margins, and robust cash flows. While leverage remains high, posing a risk, the significant improvement in equity and cash flow metrics is promising. The company is well-positioned in the software industry with a trajectory of growth and efficiency, though careful management of debt levels will be crucial.Income Statement
AppLovin has shown strong growth with a consistent increase in total revenue over the years, reaching $4.71 billion in 2024 from $0.99 billion in 2019. The gross profit margin has remained robust, reflecting efficient cost management. Net profit margins improved significantly from losses in earlier years to a positive 33.55% in 2024, indicating enhanced profitability. EBIT and EBITDA margins are also solid, with EBIT margin at 39.78% and EBITDA margin at 39.78% for 2024, showcasing operational efficiency. The revenue growth rate from 2023 to 2024 was impressive at 43.43%.85
Very Positive
Balance Sheet
The balance sheet shows moderate improvement, with stockholders' equity rebounding to $1.09 billion in 2024 from negative values pre-2021. The debt-to-equity ratio remains high at 3.26, indicating significant leverage, but the equity ratio improved to 18.57%, reflecting a better balance between equity and assets. Return on equity (ROE) surged to 144.99% in 2024, driven by high net income, but high leverage poses a risk.70
Positive
Cash Flow
AppLovin's cash flow performance is strong, with a substantial increase in operating cash flow and free cash flow over the years. The free cash flow growth rate from 2023 to 2024 was an impressive 98.09%. The operating cash flow to net income ratio is favorable at 1.33, indicating efficient cash generation relative to earnings. Free cash flow to net income ratio is robust at 1.33, highlighting strong cash flow support for earnings.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.71B | 3.28B | 2.82B | 2.79B | 1.45B | Gross Profit |
| 3.54B | 2.22B | 1.56B | 1.81B | 895.51M | EBIT |
| 1.87B | 648.21M | -8.65M | 150.02M | 24.84M | EBITDA |
| 2.34B | 1.15B | 513.77M | 597.74M | 186.79M | Net Income Common Stockholders |
| 1.58B | 356.71M | -217.41M | 35.45M | -125.93M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 741.41M | 502.15M | 1.08B | 1.52B | 317.24M | Total Assets |
| 5.87B | 5.36B | 5.85B | 6.16B | 2.15B | Total Debt |
| 3.56B | 3.18B | 3.30B | 3.31B | 1.69B | Net Debt |
| 2.81B | 2.68B | 2.22B | 1.79B | 1.38B | Total Liabilities |
| 4.78B | 4.10B | 3.95B | 4.03B | 2.31B | Stockholders Equity |
| 1.09B | 1.26B | 1.90B | 2.14B | -158.54M |
| Cash Flow | Free Cash Flow | |||
| 2.09B | 1.06B | 406.16M | 356.39M | 219.64M | Operating Cash Flow |
| 2.10B | 1.06B | 412.77M | 361.85M | 222.88M | Investing Cash Flow |
| -106.75M | -77.83M | -1.37B | -1.21B | -679.89M | Financing Cash Flow |
| -1.75B | -1.56B | -526.85M | 3.11B | 377.86M |
AppLovin Technical Analysis
Positive
314.03
Price Trends
349.94
Negative
326.18
Positive
212.95
Positive
Market Momentum
-15.02
Negative
53.67
Neutral
94.76
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For APP, the sentiment is Positive. The current price of 314.03 is above the 20-day moving average (MA) of 302.17, below the 50-day MA of 349.94, and above the 200-day MA of 212.95, indicating a neutral trend. The MACD of -15.02 indicates Negative momentum. The RSI at 53.67 is Neutral, neither overbought nor oversold. The STOCH value of 94.76 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for APP.
AppLovin Risk Analysis
AppLovin disclosed 57 risk factors in its most recent earnings report. AppLovin reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
AppLovin Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $61.06B | 15.20 | 22.60% | 2.51% | 0.23% | -0.09% | |
74 Outperform | $37.61B | 36.72 | 14.04% | 0.53% | -2.99% | -0.46% | |
72 Outperform | $106.76B | 69.16 | 134.52% | ― | 43.44% | 351.19% | |
68 Neutral | $11.43B | ― | -5.37% | ― | 18.03% | 82.15% | |
62 Neutral | $37.68B | ― | -51.45% | ― | 1.00% | -148.89% | |
58 Neutral | $8.83B | ― | -20.84% | ― | -17.10% | 21.82% | |
58 Neutral | $21.97B | 10.49 | -18.75% | 2.40% | 4.80% | -25.17% |
* Technology Sector Average
Performance Comparison
APP
AppLovin
314.03
241.43
332.55%
EA
Electronic Arts
144.55
14.72
11.34%
NTES
NetEase
99.93
-0.77
-0.76%
TTWO
Take-Two
213.51
67.37
46.10%
ROKU
Roku
78.29
13.65
21.12%
U
Unity Software
22.73
-4.47
-16.43%
AppLovin Earnings Call Summary
Earnings Call Date: Feb 12, 2025 | % Change Since: -17.43% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
The earnings call highlighted significant revenue growth and successful expansion into new advertising categories beyond gaming, including ecommerce. The company also announced a strategic sale of its Apps business to focus on its advertising platform. Despite increased data center costs and a slight decline in Apps revenue, the company maintained strong profitability and provided a positive financial outlook for the next quarter.Highlights
Record Revenue Growth
Total revenue increased by 44% year-over-year to $1.37 billion for the quarter, with adjusted EBITDA rising 78% to $848 million.
Strong Free Cash Flow
Generated $695 million in free cash flow, up 105% year-over-year, with a 28% quarter-over-quarter increase.
Successful Expansion Beyond Gaming
Captured meaningful holiday shopping advertising dollars and expanded advertising categories beyond gaming, including positive early outcomes for ecommerce advertisers.
Sale of Apps Business
Signed a term sheet to sell the Apps business for a total consideration of $900 million, including $500 million in cash.
High Adjusted EBITDA Margin
Achieved an adjusted EBITDA margin of 62% for the quarter.
Strong Financial Guidance
Guidance for Q1 2025 predicts $1.030 billion to $1.050 billion in advertising revenue with adjusted EBITDA between $805 million and $825 million, maintaining a 78% to 79% margin.
Lowlights
Increased Data Center Costs
Experienced a step function increase in data center costs, impacting the flow-through from revenue to adjusted EBITDA.
Apps Revenue Decline
Apps revenue decreased by 1% year-over-year to $373 million, with an adjusted EBITDA of $71 million representing a 19% margin.
Company Guidance
In the earnings call for AppLovin's fourth quarter and full-year results ending December 31, 2024, the company provided optimistic guidance for the future, highlighting a significant transition in their business model. The company achieved a 44% increase in total revenue year-over-year, reaching $1.37 billion, and a 78% increase in adjusted EBITDA to $848 million, with a 62% adjusted EBITDA margin. For the first quarter of 2025, AppLovin expects the Advertising business to generate between $1.030 billion and $1.050 billion in revenue, with adjusted EBITDA ranging from $805 million to $825 million, targeting a margin of 78% to 79%. The company anticipates Apps revenue to be between $325 million and $335 million, with adjusted EBITDA between $50 million and $60 million. A key focus will be on expanding their ecommerce category and rolling out automated tools to enhance accessibility and scale. AppLovin is poised to divest its Apps business, aiming to close the transaction by Q2 2025, signaling a strategic shift towards concentrating fully on their advertising platform. They highlighted their favorite metric, adjusted EBITDA per employee, which stood at approximately $3 million in Q4 for the Advertising business, emphasizing their commitment to operational efficiency and lean growth.AppLovin Corporate Events
Executive/Board ChangesM&A Transactions
AppLovin Plans to Sell Mobile Gaming Business
Neutral
Feb 12, 2025
On February 10, 2025, Katie Jansen, AppLovin’s Chief Marketing Officer, announced her resignation effective March 14, without any disagreements related to company affairs. On February 12, 2025, the company revealed plans to sell its mobile gaming business for $900 million through a term sheet agreement, involving both equity and cash, with a provision for financing by AppLovin in case the acquirer cannot secure necessary funds.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.