AppLovin Set to Post Strong Q4 Earnings: Impressive Growth Forecast
AppLovin Corporation (APP) will release its fourth-quarter 2024 results on Feb. 12, following the market close.
Stay updated with Zacks Earnings Calendar to catch key market news.
Expectations for Q4 Earnings Look Positive
The Zacks Consensus Estimate forecasts earnings of $1.28 for the upcoming quarter, reflecting a substantial growth of 161.2% compared to the same period last year. Revenue estimates stand at $1.26 billion, which implies a year-over-year growth of 32.3%.
In the last 30 days, two estimates have been raised, with no declines, indicating growing optimism. This has resulted in a slight increase in the earnings consensus for the quarter.
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AppLovin has a remarkable history of earning surprises. It exceeded the Zacks Consensus Estimate in the past four quarters with an average surprise of 26.2%.
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Positive Earnings Expectations for APP
Our analysis suggests a likely earnings beat for APP this quarter. The presence of a positive Earnings ESP alongside a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) enhances the likelihood of strong earnings performance. Currently, APP shows an Earnings ESP of +1.12% and holds a Zacks Rank #2.
For more insights into stocks to invest in before earnings reports, check out our Earnings ESP Filter.
Software Platform Expected to Boost Growth
We anticipate the company’s top-line growth in the upcoming quarter to be primarily driven by gains in the Software Platform. The revenue consensus for this segment is estimated at $892.7 million, signaling a 54.8% increase year over year. Meanwhile, revenues from Apps are projected at $367.72 million, which marks a modest 1.8% growth from the previous year.
Adjusted EBITDA for the Software Platform is expected to reach $683.7 million, indicating a substantial 62.7% growth year over year. Overall, APP’s adjusted EBITDA should also experience approximately 35.5% growth year over year.
APP Stock Performance Shows Strong Uptrend
In the past six months, APP’s stock has soared by an impressive 466.5%, well above the industry average of 78.3%. In comparison, competitors such as Alphabet Inc. (GOOGL) with a 20.5% rise and Meta Platforms (META) with a 45.6% increase have notably lagged behind.
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Despite this surge, APP stock appears undervalued, trading at a 12-month EV-to-EBITDA ratio of 66.21X, significantly lower than the industry average of 96.27X.
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Understanding the Risks and Rewards of Investing in APP
AppLovin’s recent financial outcomes reflect robust fundamentals and a noteworthy growth trajectory. The company’s revenue has dramatically benefitted from its AXON 2.0 technology and strategic gaming studio expansions. In Q3 2024, revenues jumped 39% year over year and 11% sequentially, showcasing strong operational performance.
Profitability measures also show encouraging trends, with adjusted EBITDA increasing by 72% year over year and 20% sequentially during the last quarter. Net income soared by 300% compared to the same quarter in 2023, as well as 40% sequential growth, highlighting AppLovin’s ability to convert revenue gains effectively.
For 2023, the company recorded a 76% rise in revenue and a 41% jump in adjusted EBITDA, reflecting its capability to leverage market opportunities, particularly in gaming and in-app advertising.
However, there are uncertainties. The in-game advertising segment may face growth challenges, and external ventures outside gaming could add risk. Regardless, with its focus on advanced technology and gaming industry growth, AppLovin is well-positioned for sustainable expansion.
APP Stock Presents a Strong Buying Opportunity
Given AppLovin’s strong financial performance, growth potential, and current undervalued status, it offers an attractive investment prospect. The combination of solid revenue and earnings growth, along with increasing analyst confidence, positions APP as a compelling buying option. Although the stock has risen sharply, valuation suggests additional upside may remain.
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