AppLovin Faces Volatility but Shows Strong Growth Potential
Before the recent market selloff, AppLovin APPwas among the hottest stocks of the year. This company has transformed the app landscape, allowing developers to publish and monetize mobile applications effectively, marking its status as one of the top-performing IPOs since going public in 2021.
Currently, it seems that nearly every company has a mobile app enhancing its digital presence. A few weeks ago, APP shares soared to an all-time high of $525. However, the stock has since decreased 36% from these peak levels, leading investors to contemplate whether APP can regain its momentum.
Image Source: Zacks Investment Research
Positive EPS Revisions Indicate Recovery Potential
Despite experiencing significant market volatility, the underlying factors that contributed to AppLovin’s earlier success remain strong. A notable driver is the trend of positive earnings estimate revisions, hinting at a potential recovery as market conditions stabilize.
In the past 60 days, AppLovin’s fiscal 2025 EPS estimates increased by 16%, moving from $5.89 to $6.87. Additionally, the company surpassed Q4 EPS expectations for FY24 by 29.1%. The outlook for FY26 EPS estimates is even more promising, having jumped nearly 29% from $7.31 to $9.42 over the last two months.
Image Source: Zacks Investment Research
Evaluating AppLovin’s Valuation
Following the recent stock pullback, AppLovin is now trading at a more attractive forward earnings multiple of 48.2X, with substantial double-digit EPS growth expected for FY25 and FY26. In a favorable comparison, APP currently trades below its one-year high of 98.9X forward earnings and is closer to its 12-month median of 29.6X.
Image Source: Zacks Investment Research
Conclusion: Bright Future for AppLovin
AppLovin is projected to experience double-digit sales growth in FY25 and FY26, making its investment potential noteworthy, particularly in light of recent market fluctuations. The company has achieved a Zacks Rank #1 (Strong Buy) rating due to rising EPS revisions.
Consequently, APP is beginning to present a “buy the dip” opportunity, as its P/E valuation has stabilized. This development provides reassurance to long-term investors, suggesting that the recent declines in this popular growth stock reflect a healthy market correction.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock expected to gain +100% or more in 2024. While not every selection can succeed, past recommendations have achieved returns of +143.0%, +175.9%, +498.3%, and +673.0%.
Many of the stocks featured in this report are currently under the radar on Wall Street, offering a prime opportunity for early investors.
Today, See These 5 Potential Home Runs >>
AppLovin Corporation (APP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
