On Tuesday, BofA Securities maintained a positive stance on AppLovin Corp (NASDAQ:), currently trading at $337.03 with a market capitalization of $114.58 billion, reiterating a Buy rating and a $375.00 price target. The firm’s analyst, Omar Dessouky, addressed the performance of the company’s first-party (1P) gaming, noting it fell below Street expectations, which could be a nuanced factor for the fourth-quarter setup.
According to InvestingPro analysis, the stock appears overvalued at current levels, despite showing impressive growth with revenue increasing 41.48% over the last twelve months. AppLovin’s third-party (3P) estimates indicated a 4% quarter-over-quarter decline in fourth-quarter Apps revenue, contrasting with the Street’s anticipation of a 2% increase. This sequential drop may come as a surprise to investors, as the fourth quarter is typically the high season for mobile gaming.
Dessouky pointed out that while the underperformance of the gaming portfolio is not a significant concern, it does introduce a subtle complexity to the fourth-quarter expectations. It remains uncertain whether management’s consolidated guidance for the fourth quarter had accounted for the usual seasonal increases, which are typically in the low to mid single-digit percentage range quarter-over-quarter.
Moreover, the analysis highlighted that mobile bookings from Ubisoft (EPA:) (UBI), which are part of the third-party estimates, experienced an 11% year-over-year decrease in December. Tracking for the fourth quarter suggests a more pronounced 14% quarter-over-quarter reduction.
AppLovin’s position in the mobile gaming market is closely watched by investors, as the company’s performance can be indicative of broader trends in the industry. The reiteration of the Buy rating and price target by BofA Securities suggests confidence in the company’s long-term prospects despite the short-term fluctuations noted in the recent performance of its gaming portfolio.
InvestingPro data reveals the company maintains a “GREAT” financial health score of 3.35, with 18 additional premium insights available to subscribers. The comprehensive Pro Research Report, available as part of the InvestingPro subscription, provides detailed analysis of APP’s market position among 1,400+ top US stocks.
In other recent news, AppLovin Corp has been the subject of several positive analyst updates. Piper Sandler maintained its Overweight rating on AppLovin’s stock, highlighting the company’s potential for achieving 20-30% growth targets by improving conversion rates. Similarly, Loop Capital upgraded its price target on AppLovin shares to $450, citing the company’s promising growth outlook, particularly within its core gaming business.
Oppenheimer also maintained a positive outlook, keeping its Outperform rating and a price target of $480, viewing the recent decline in AppLovin’s stock price as an attractive entry point for investors. The firm highlighted AppLovin’s moderate debt levels and the exceeding of short-term obligations by liquid assets.
AppLovin’s recent financial maneuvers include issuing $3.55 billion in senior notes and securing a new $1 billion unsecured revolving credit facility with JPMorgan Chase (NYSE:). These moves are part of a strategy to repay existing senior secured term loan facilities due in 2028 and 2030.
The company’s third-quarter results showcased a 39% year-over-year increase in revenue, reaching $1.2 billion. Projections for Q4 2024 revenue are between $1.24 billion and $1.26 billion, with adjusted EBITDA expectations of $740 million to $760 million.
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