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AppLovin's High Valuation and Expansion Beyond Gaming Prompt Analyst Caution
APPApplovin(APP) Benzinga·2024-11-07 19:22

Core Insights - Applovin Corp reported a strong third-quarter performance with revenue of 1.2billion,a391.2 billion, a 39% increase year-over-year, surpassing analyst expectations of 1.13 billion [1] - The company has increased its share repurchase program by 2billion,indicatingconfidenceinitsfinancialposition[1]−Fourth−quarterrevenueguidanceisprojectedbetween2 billion, indicating confidence in its financial position [1] - Fourth-quarter revenue guidance is projected between 1.24 billion and 1.26billion,reflectingcontinuedgrowth[1]AnalystRatingsandProjections−JPMorgananalystCoryCarpentermaintainedaNeutralratingbutraisedthepricetargetfrom1.26 billion, reflecting continued growth [1] Analyst Ratings and Projections - JP Morgan analyst Cory Carpenter maintained a Neutral rating but raised the price target from 160 to 200,citingsubstantialbeatsinthird−quarterresultsandoptimisticfourth−quarterguidance[2][4]−NeedhamanalystBernieMcTernanreiteratedaHoldrating,whileBenchmarkanalystMarkZgutowiczmaintainedaSellratingwithapricetargetof200, citing substantial beats in third-quarter results and optimistic fourth-quarter guidance [2][4] - Needham analyst Bernie McTernan reiterated a Hold rating, while Benchmark analyst Mark Zgutowicz maintained a Sell rating with a price target of 66 [2] - McTernan raised adjusted EBITDA estimates for 2025 by 14%, reflecting a 23% year-over-year increase, with minimal contributions from e-commerce [6] Software Segment Performance - The Software Platform achieved a remarkable 17% sequential growth, driven by technology upgrades, particularly in the Axon algorithm [3] - Software revenue grew 66% year-over-year and 18% sequentially in the third quarter, with adjusted EBITDA reaching 653million,an80653 million, an 80% increase year-over-year [7] - Management attributes this success to the technology's ability to expand the total addressable market and enhance client spending [8] E-commerce Initiatives - Applovin's e-commerce advertising platform pilot is receiving positive feedback, with expectations for significant impact by 2025 [9] - The company anticipates that e-commerce will become a major growth driver, with resources increasingly allocated to this segment [3][9] - McTernan's estimates for fiscal 2024 revenue and adjusted EBITDA were raised by 5% and 9%, respectively, considering long-term benefits from e-commerce expansion [10] Market Position and Valuation - Carpenter's revised price target reflects a multiple of 22.5x on estimated 2025 EBITDA, which, while a premium compared to most ad tech peers, is still a discount relative to The Trade Desk's 48x [4][5] - The stock price of Applovin increased by 44.1% to 242.31 following the positive quarterly results [10]