AppLovin Corporation (APP – Free Report) has seen its stock surge 34% in the past three months. This impressive rise has outpaced the industry’s 28% rally.
Compared with its competitors in the in-game mobile advertising space, APP’s performance is notably stronger. Alphabet Inc. (GOOGL – Free Report) has gained 4.5%, and Meta Platforms (META – Free Report) has returned 25.5% over the same period.
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Now, the key question for investors is whether the stock’s growth trajectory justifies a “Buy” at its current level or if waiting for a pullback might offer a better entry point.
APP’s Strong Fundamentals Drive Growth
AppLovin’s recent financial results underscore its strong fundamentals and impressive growth trajectory. The company has achieved remarkable revenue growth by leveraging its AXON 2.0 technology and strategic expansion in gaming studios. In the fourth quarter of 2024, revenues increased 44% year over year and 14% sequentially, reflecting robust operational performance and market demand.
The company’s profitability metrics also demonstrate significant improvement. Adjusted EBITDA surged 78% year over year and 17.5% sequentially during the quarter, underscoring the efficiency of its business model. Net income saw a massive 248% increase from the same quarter in 2023, along with a 38% sequential rise, highlighting AppLovin’s ability to convert revenue growth into bottom-line gains effectively.
For 2024, AppLovin reported a 43% year-over-year revenue increase and an81% rise in adjusted EBITDA. These figures highlight its capacity to capitalize on market opportunities, especially within the gaming and in-app advertising segments, while maintaining operational efficiency.
However, potential risks persist. The growth in the in-game advertising segment may face challenges, and the uncertain impact of the company’s ventures outside gaming could introduce volatility. Nonetheless, AppLovin’s strategic focus on innovative technology and expansion within the gaming industry positions it well for sustained growth. With AXON 2.0 driving operational efficiencies and a diversified approach to revenue generation, AppLovin is poised to maintain its growth momentum, making it an attractive option for long-term investors.
Analysts Confident in APP’s Earnings Growth
The Zacks Consensus Estimate for APP’s 2025 earnings is pegged at $6.14, indicating 35.5% growth from the year-ago level. Earnings in 2026 are expected to increase 26.1% from the prior-year actuals. The company’s sales are expected to grow 20.3% and 19.2% year over year, respectively, in 2025 and 2026.
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In the past 60 days, three estimates for 2025 earnings have been revised upward, with one downward revision. The Zacks Consensus Estimate for the quarter’s earnings has increased 4.2% during this period. For 2026, three estimates moved north over the past 60 days versus no southward revisions. This indicates strong confidence among analysts in the company’s ability to improve its financial performance soon. The Zacks Consensus Estimate for the quarter’s earnings has increased 5.9% during this period.
Image Source: Zacks Investment Research
APP is a Buy
APP presents a compelling investment opportunity due to its impressive financial performance and robust growth prospects. The company’s recent results and strategic initiatives underscore its potential for continued success in the gaming and software sectors. AppLovin’s strong fundamentals, innovative technology and strategic growth initiatives position it as a leader in its industry. With a solid financial outlook and increasing analyst confidence, we recommend a “Buy” rating for APP stock to capitalize on its promising growth trajectory.
APP currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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