1 Wall Street Analyst Thinks AppLovin Stock Is Going to $115. Is It a Buy?
There's no denying that recent advances in artificial intelligence (AI) have been a game changer for companies able to successfully harness the power of these next-generation algorithms. App discovery platform AppLovin (NASDAQ: APP) certainly falls into that category.
The company's AI-fueled platform, which targets digital advertising and helps app developers get their creations discovered, hit the ground running last year and never looked back. One analyst thinks there's much more to come.
Feel the love
Macquarie analyst Tim Nollen boosted his price target on AppLovin to a Street-high $115 while maintaining an outperform (buy) rating on the shares. For those keeping track at home, that represents potential gains for investors of 33%, compared to Monday's closing price. The analyst cited AppLovin's recent results as sparking his enthusiasm.
There was certainly a lot to like. For the first quarter, AppLovin generated revenue that grew 48% year over year to $1.06 billion, resulting in earnings per share (EPS) of $0.70, compared to a loss of $0.01 in the prior-year quarter. For context, analysts' consensus estimate called for revenue of $974 million and EPS of $0.57, so AppLovin sailed past expectations. Yet that only tells half the story.
AppLovin's software platform revenue of $678 million surged 91% year over year, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the segment soared 125%.
The analyst noted that advertising "rebounded sharply" in the first quarter, particularly in connected TV. There's also the matter of the impending death of ad-tracking cookies, which sent the ad tech industry into a tailspin. Nollen posited, "Cookies do not matter but transparency does," a view that favors AppLovin.
Is the stock a buy?
Despite its nearly quadrupling over the past year, AppLovin stock remains attractively priced, currently selling for just 15 times forward earnings. Given the runway ahead and the ongoing recovery in the digital-advertising market, that makes AppLovin stock a buy.
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Danny Vena has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
