Past performance does not predict future results. Informational only, not investment advice.
AppLovin presents a more speculative opportunity with solid FCF and low debt, though the company must demonstrate continued growth. AI and robotics are uncertain factors.
Author is going long APP with a 500K+ position ahead of earnings.
Stock has fallen on failed lawsuit despite strong fundamentals: 30% CAGR growth projected, high 80s margins, 50s revenue growth, and positive FCF generation. Management expects strong Q3 (seasonal tailwind), and bearish sentiment from Cramer presents a contrarian opportunity.
AppLovin's $110B market cap prices in $35B of value from unproven non-gaming expansion (non-gaming apps, open web ads, connected TV) where it has no competitive advantage against entrenched players like Google and Meta. Revenue growth has shifted from volume to price increases with structural ceilings, and the company lacks transparency on segment breakdown and ad spend metrics, making the valuation unjustifiable at current levels.
AppLovin is growing 60% YoY and now trades at a more reasonable valuation after recent price declines that the market may have overreacted to. The author initiated a 5% portfolio position at $303, viewing the current price as attractive relative to growth prospects rather than a falling knife.
APP trades with a margin of safety at 18x forward PE despite 50%+ revenue growth, 80%+ profit margins, and management guidance for 30%+ growth over two years. The company's new e-commerce ad business offers significant TAM expansion, and strong free cash flow generation combined with low debt and high cash support upside to $800-900 per share.
AppLovin appears significantly undervalued at 26x P/E and 0.59 PEG despite 60% QoQ revenue growth, 65% profit margins, and strong competitive positioning with 2-5x ROAS advantage in mobile gaming. The company's expansion into high-growth TAM segments (e-commerce and CTV) combined with solid Q2 results provides substantial upside potential.
AppLovin's Q2 miss was temporary; 53% revenue growth and 84% EBITDA margins remain strong fundamentals. At 16.5x 2027E earnings, the stock is cheap for its growth profile, and the selloff appears overdone unless Q3 disappoints.
AppLovin is undervalued relative to its AI business quality and cash generation. The company grows revenue 50% YoY, reduces share count quarterly through $4B+ in buybacks, requires minimal CapEx, and generates strong cash flow when stripping out stock-based compensation—metrics that rival Mag7 companies but at a fraction of their valuation.
Author is bullish on AppLovin ahead of earnings, expecting a significant move higher. The position was established before earnings with anticipation of a positive print.
APP offers cleaner exposure to the performance ads and AI growth trend demonstrated by strong results from Meta, Reddit, and Zeta. The author holds multiple call spreads positioned for May earnings, expecting guidance to remain robust and ad spending momentum to continue.
End of results.