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AppLovin upgraded at BTIG on 'improving fundamental outlook and undemanding valuation'

Published 24/07/2023, 17:08
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APP
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BTIG analysts upgraded shares of AppLovin (NASDAQ:APP) to Buy from Neutral, with a $34 per share price target in a note Monday.

The analysts said they are upgrading the stock ahead of its second quarter earnings based upon an improving fundamental outlook and undemanding valuation.

"The setup for AppLovin's Software business (~50% of revenue, ~75% of EBITDA) is improving in the early stages of the Axon 2.0 product cycle," they said. "Following 1Q23 earnings, AppLovin management highlighted an improving growth marketing environment with clients leaning back into spend, and our late June checks subsequently pointed to ROAS rates running at teens+ levels with only basic utilization of AppDiscovery's event modeling capabilities."

The analysts also noted that AppLovin also expects its 1P games business to stabilize after several quarters of restructuring-related headwinds and sequential revenue decline.

"An improving Apps setup is a positive for the business, in our view, and should help investors discount the Software upside we see ahead," the analysts added. "Collectively, the improving Software setup and a stabilizing Apps business is enough to bring our estimates ahead of consensus, and on an EBITDA basis when compared to historical averages or long-run growth rates the valuation doesn’t appear demanding."

After an initial jump as high as $29.50 per share, APP is up 0.8% at $28.32 at the time of writing.

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