AppLovin’s Rapid Ad Growth, AI Gains Drive Hike In Analyst Price Forecast

Applovin Corp (NASDAQ:APP) stock closed higher by 12% on Thursday after the company reported better-than-expected first-quarter financial results on Wednesday.

AppLovin reported quarterly sales of $1.48 billion, beating the consensus estimate of $1.38 billion and representing a 40% year-over-year increase.

The company reported adjusted earnings per share of $1.67, beating the consensus estimate of $1.45.

The company guided second-quarter advertising revenue of $1.19 billion-$1.21 billion.

Also Read: Muddy Waters Doubles Down On AppLovin In New Short Report Ahead Of Q1 Earnings

Wall Street analysts rerated the stock after the report:

JP Morgan analyst Cory Carpenter maintained AppLovin with a Neutral and raised the price target from $270 to $355.
Goldman Sachs analyst Eric Sheridan reiterated a Neutral on AppLovin and raised the price target from $335 to $435.
BofA Securities analyst Omar Dessouky maintained AppLovin with a Buy and a price target of $580.

JP Morgan: The rerating reflects risk shares could underperform in a weaker macro environment given e-commerce exposure and less advertiser breadth than larger ad platforms.

Applovin revenue grew 40% year over year, and adjusted EBITDA grew 83% year over year, topping management guidance of 29% and 59%. The advertising segment once again drove the upside, with revenue growth of 71% year over year and adjusted EBITDA growth of 92% year over year to a record 81% margin.

Management called out model enhancements and a full quarter contribution of e-commerce ads, with gaming accounting for most of the sequential growth.

Applovin guided to advertising revenue of $1.195-1.215 billion (69% Y/Y) and advertising adjusted EBITDA of $970 million-990 million (88% Y/Y, 81% margin), both well above the consensus of $1.100 billion and $863 million. The outlook implies sequential revenue growth of 3%-5%, which reflects seasonality and resource constraints in onboarding new advertisers until the self-serve platform opens up.

Carpenter projected second-quarter revenue of $1.22 billion and EPS of $2.01.

Goldman Sachs: AppLovin management emphasized key themes in its first-quarter earnings report. Strong advertising revenue performance on the back of continued success with its Axon 2.0 platform and the early scaling of its push into the e-commerce opportunity.

A focus on executing against their advertising opportunity on the back of technological scaling. A focus on driving operational efficiencies with an aim toward the compounded effect of high incremental margins. In addition, AppLovin announced it has reached an agreement to sell its legacy Apps business to Tripledot Studios as it completes its multi-year strategic shift towards advertising.

Over the long term, Sheridan maintains that AppLovin has a collection of businesses that can produce above-average advertising/marketing industry growth and a strong margin profile in a normalized mobile ads/mobile gaming landscape in the coming years.

Sheridan projected second-quarter revenue of $1.51 billion and EPS of $2.12.

BofA Securities: First-quarter advertising segment revenue grew by 71% Y/Y, topping company and Dessouky estimates. Over half of the sequential growth came from gaming advertisers, from which he noted that e-commerce grew to $180 million (ahead of Dessouky’s estimate of $150 million), up from $100 million in the fourth quarter.

The pace of web merchant onboarding slowed compared to December because AppLovin’s e-commerce team remains small and must manage the advertisers who have already been onboarded while onboarding new advertisers.

Demand remains overwhelmingly strong, and the rollout of its self-service dashboard this quarter will re-accelerate onboarding, likely beyond 100 incremental monthly advertisers.

Management sounded somewhat cautious on second-quarter 2025 guidance (advertising segment +5% Q/Q), citing the temporary slowdown in web merchant onboarding; guidance does not assume a meaningful increase in e-commerce net revenue.

Nonetheless, he modeled 11% sequentially because AI model enhancements in the quarter could result in step change performance and results ahead of his model. Moreover, second-quarter e-commerce industry sales benefit from ~5% seasonality.

Dessouky projected second-quarter revenue of $1.60 billion and EPS of $2.34.

Price Action: APP stock is down 2.73% to $331.84 at the last check on Friday.

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Latest Ratings for APP

Date	Firm	Action	To
Feb 2022	Morgan Stanley	Maintains	Overweight
Feb 2022	Credit Suisse	Maintains	Outperform
Feb 2022	Credit Suisse	Maintains	Outperform

View More Analyst Ratings for APP

View the Latest Analyst Ratings

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