On Monday (NASDAQ:MNDY), Loop Capital, a financial services firm, upgraded its stock price target for AppLovin Corp (NASDAQ:APP) to $385.00, a significant increase from the previous target of $181.00. The firm maintained its Buy rating on the stock. This adjustment follows AppLovin's recent announcement of exceptional financial performance, which exceeded market expectations.
The analyst at Loop Capital justified the new price target by applying a 30X adjusted EBITDA multiple to AppLovin's software (advertising) business, up from the prior 17.5X. The substantial hike in the price target is attributed primarily to this change in the valuation multiple, which accounts for about two-thirds of the increase. The remaining one-third stems from a 23% rise in the firm's earnings estimates compared to earlier projections.
AppLovin's recent financial success, described as a "blow-out beat-and-raise" by the analyst, has been a key driver behind the revised forecast. The company's robust results have significantly influenced Loop Capital's outlook on the stock's value.
The report also notes that short interest in AppLovin had surged by approximately 50% from August to October, reaching 22 million shares, equivalent to 11% of the public float, and requiring over six days to cover. The analyst suggested that this short interest was likely squeezed out as the stock's value climbed.
Loop Capital anticipates that investors might take time to align with their revised valuation assessment. Despite this, they express strong confidence in the stock, encouraging investors to buy on any potential pullbacks and reiterating their Buy rating.
In other recent news, AppLovin Corp witnessed an impressive performance in its third quarter, with revenue reaching $1.2 billion, a 39% increase year-over-year. This robust growth was primarily driven by the company's advertising network's exceptional performance within the gaming sector.
Moreover, revenues from AppLovin's Software (ETR:SOWGn) Platform surged by 66% compared to the same period last year, attributed to technological advancements in the AppDiscovery platform.
Daiwa Securities upgraded AppLovin's stock from a Neutral rating to Outperform, following these strong results. The firm also significantly increased the price target to $280 from the previous $80. Furthermore, the company's apps segment experienced a modest growth of 1% year-over-year, mainly due to higher prices for in-app purchases and a greater volume of ad impressions.
In its recent earnings call, AppLovin expressed confidence in its growth prospects, particularly highlighting the potential in mobile gaming advertising and the promising results from the e-commerce pilot.
The company projects Q4 2024 revenue to be between $1.24 billion and $1.26 billion, with adjusted EBITDA expectations of $740 million to $760 million. These recent developments indicate a positive outlook for AppLovin's future performance.
InvestingPro Insights
AppLovin's recent performance aligns with several key metrics and insights from InvestingPro. The company's revenue growth of 41.48% over the last twelve months as of Q3 2024 supports Loop Capital's optimistic outlook. This growth is further reinforced by an InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
The stock's recent surge is reflected in InvestingPro data, showing a remarkable 562.27% price total return over the past year. This aligns with another InvestingPro Tip suggesting that AppLovin has seen a significant return over the last week, which could be related to the short squeeze mentioned in the article.
However, investors should note that AppLovin is trading at a high P/E ratio of 87.66, which corresponds to an InvestingPro Tip cautioning that the stock is trading at a high earnings multiple. This valuation metric may be a factor for investors to consider as they assess Loop Capital's upgraded price target.
For readers seeking a more comprehensive analysis, InvestingPro offers 22 additional tips for AppLovin, providing a deeper understanding of the company's financial health and market position.
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