Stock Spotlight

AppLovin maintains scorching pace

 

Few stocks seem more timely than AppLovin ($131; APP). Just 6% of S&P 1500 Index stocks increased per share profits more than AppLovin’s 93% growth for the 12 months ended June; just 3% of stocks posted sales growth stronger than AppLovin’s 37%. The stock has soared 83% since its June-quarter report on Aug. 7, and has nearly tripled this year.

That surge has caused AppLovin’s Quadrix® Value score to drop to 12, down from 42 at the end of December. Still, the trailing P/E ratio of 36 remains below its own five-year norm of 45. With an Overall rank of 83, AppLovin is a Focus List Buy.

A whole lotta love

AppLovin’s software platform (62% of revenue for the 12 months ended June, 88% of operating income) helps companies scale their businesses and expand their reach to customers. This technology lets marketers create ads personalized to a targeted audience. It also offers bidding software for website publishers to run auctions for ad sales. For both marketers and website publishers, AppLovin offers analytics technology to help maximize sales and effectiveness.

Recent growth has been entirely driven by the software-platform business, with revenue soaring 80% and operating profit more than doubling for the 12 months ended June. For the long term, management targets 20% to 30% year-over-year sales growth for its software-platform segment; that outlook implies sequential quarterly growth of roughly 5% to 7%.

The company also owns a portfolio of mobile applications (38%, 12%) that includes more than 200 games across five genres that are free for users to play, as well as tools for mobile-application developers. The apps segment has suffered a 1% revenue dip and 3% lower operating profit over the past 12 months. For the June quarter, monthly active players dipped 6% to 1.7 million, though average revenue rose 13% to $52.

AppLovin said September-quarter revenue should climb 29% to 31%. The consensus has risen since the announcement but remains slightly below the high end of management’s forecast. Management expects operating profit margin to rise further for the three months ending in September, building on six straight quarters of expansion.

The consensus calls for per-share profits to more than quadruple in the September quarter, nearly triple in the December quarter, and climb 11% in 2025. Revenue growth seems likely to remain consistently above 13%.

Big mover

AppLovin shares have rallied 42% since Sept. 10, when analysts at Bank of America made bullish comments following a meeting with management. The analysts said AppLovin’s software-platform segment appears capable of growing several times faster than its overall market through 2026. The stock rose further on another analyst report Sept. 17.

AppLovin Corp., 1100 Page Mill Road, Palo Alto, CA 94304, (800) 839-9646, www.applovin.com.

 

 

 

 

Quadrix Scores

 

* Earnings exclude special items.
NA Not Available.
Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.