On Thursday, BTIG revised its outlook on AppLovin Corp (NASDAQ:) shares, increasing the price target to $100 from $87 previously, while reiterating a Buy rating on the stock.
The decision comes on the heels of AppLovin's Q1 2024 results, which exceeded both consensus expectations and higher buy-side expectations, primarily due to strong AppDiscovery trends and an uptick in maximum delivered mix shifts.
The company's software segment was a huge success, with revenue reaching $678 million versus BTIG's estimate of $614 million. Analysis of the quarter's performance indicates that approximately 90% of the $102 million revenue increase quarter-over-quarter was driven by AppDiscovery.
It is worth noting that this growth is due to increased total spending from existing gaming customers, rather than new developer acquisitions. This finding challenges the previous assumption that software growth in 2024 will depend heavily on obtaining budgets from larger studios.
Positive results from the gaming sector have led to a more optimistic outlook for the total addressable gaming market (TAM). BTIG highlights that their high-performance ROI marketing model has proven effective in automatically unlocking spend and TAM potential. Furthermore, the opportunity for AppLovin to partner with larger studios later in the year remains open.
Despite less direct pressure on AppLovin's e-commerce business, progress is clear, with BTIG expressing growing confidence in the company's channel expansion capabilities.
This confidence is reinforced by developments in Flip and Axon Connect and increased spending by non-gaming customers on AppDiscovery. These factors build the data needed for AppLovin to deliver competitive performance in new channels.
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In summary, BTIG's revised estimates for AppLovin in 2024 are significantly higher, resulting in an upward revision to the price target. The company maintains strong belief in AppLovin's potential, naming it a BTIG Top Pick and recognizing the potential for further outperformance versus expectations in the current year and next.
InvestingPro Insights
The recent performance of AppLovin Corp (NASDAQ:APP) has certainly caught the attention of investors and analysts alike. With the company's stock price reflecting a strong return over the past year, up an impressive 327.01%, it's important to consider the underlying financial metrics that may be driving this growth. The company's revenue growth is particularly notable, with a 24.72% increase in the trailing twelve months as of Q1 2024, and a more significant quarterly revenue growth of 47.9% in Q1 2024.
InvestingPro Tips highlights that AppLovin is trading at a low P/E ratio relative to near-term earnings growth, with an adjusted P/E ratio of 38.86 as of Q1 2024, suggesting the stock may be undervalued. Given its growth prospects. Additionally, with a PEG ratio of just 0.24 in the same period, it indicates the potential for a higher earnings growth rate compared to its P/E ratio. This could be an attraction for investors looking for growth at a reasonable price.
For those considering investing in AppLovin, it's worth noting that analysts expect the company to be profitable this year, and management has been aggressively buying back shares, which could be a sign of confidence in the company's future. To explore more about AppLovin's financial health and future prospects, including additional InvestingPro tips, visit https://www.investing.com/pro/APP. And remember, readers can take advantage of an additional 10% off Pro and Pro+ subscriptions annually or every two years using this coupon code ProNews24. And with 14 additional tips from InvestingPro, investors can get a comprehensive understanding of AppLovin's market position.
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