On Friday, Daiwa Securities upgraded AppLovin Corp (NASDAQ:APP) stock from a Neutral rating to Outperform, significantly increasing the price target to $280 from the previous $80. This change follows AppLovin's impressive third-quarter results, which surpassed both Wall Street's expectations and the company's own guidance.
The mobile technology company reported a robust revenue of $1.2 billion in the third quarter, marking a 39% year-over-year increase. This success is largely attributed to the company's advertising network's exceptional performance within the gaming sector. Additionally, revenues from AppLovin's Software (ETR:SOWGn) Platform surged by 66% compared to the same period last year, driven by technological advancements that enhanced the AppDiscovery platform's performance.
Daiwa's analyst noted the substantial growth in net revenue per installation, which rose by 22% year-over-year, while the volume of installations saw a comparable increase of 39%. These figures represent a strong recovery and continuation of double-digit growth, addressing previous concerns that the company's growth might have reached its peak.
The company's apps segment also experienced growth, albeit more modest, with a 1% year-over-year increase. This was primarily due to higher prices for in-app purchases and a greater volume of ad impressions. The positive results and management's confident outlook on their market position have led Daiwa to anticipate further upside potential for AppLovin's shares.
InvestingPro Insights
AppLovin's impressive third-quarter results and subsequent stock upgrade are further supported by real-time data from InvestingPro. The company's revenue growth remains strong, with a 41.48% increase over the last twelve months as of Q3 2024, aligning with the 39% year-over-year increase reported in the article. This growth is reflected in the stock's performance, with AppLovin showing a remarkable 514.48% price return over the past year.
InvestingPro Tips highlight that analysts expect sales growth to continue in the current year, which corroborates Daiwa's optimistic outlook. Additionally, AppLovin's profitability is underscored by its positive net income expectations for this year and its profitability over the last twelve months.
However, investors should note that the stock is trading at high valuation multiples, including a P/E ratio of 69.22 (adjusted for the last twelve months as of Q3 2024). This suggests that while AppLovin's growth story is compelling, the stock may be priced at a premium.
For readers interested in a deeper dive into AppLovin's financials and future prospects, InvestingPro offers 21 additional tips, providing a comprehensive analysis to inform investment decisions.
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