AppLovin Corporation is one of the few technology-based companies that are well fare as far as the stock price is concerned. This is because the stock price of the firm has increased by an incredible extent of 310%, positioning it as the best growth tech company in the US with a market capitalization of above $5 billion according to FactSet. However, such a surge raises a lot of expectation for the company to post good financial results with its earnings due later in the week.
The firm’s core business is digital advertising technology and particularly focused on the gaming industry and continuous development of the firm’s capabilities in this area has been attributed to AI. Meanwhile, AppLovin’s ad business has grown faster than the company’s gaming business which has been relatively low growth. Experts predict that third quarter revenue will reach $1.13 billion- a growth of 31% after two consecutive quarters when more than 40% of revenue growth has been accomplished. Furthermore, the earnings per share (EPS) is projected to increase over three times to 92 cents while the operating income is expected to surpass $424 million respectively.
A proprietary AI advertising engine, AXON, which has improved since the introduction of its 2.0 version and is a fundamental pillar of AppLovin’s growth, is the main growth driver for the company. During the second quarter, the software end of the business grew 75% to $711 million or close to 70% of the entire corporate revenues. The firm credits the positive Quarterly results to the developments in AXON, which the firm claims has introduced targeted advertisements on its mobile gaming platforms and those partnered under licensing agreements.
The positive attitude of the market in regards to AppLovin has also led to several promotions from various research firms. Wells Fargo was the first to initiate its coverage by rating it a buy. In another instance, BTIG revised its price target on the stock to $202, which is the highest among those analysts surveyed by FactSet. Also, according to Wedbush analysts, the current market for mobile gaming ads which stands at 10 billion will grow to 50 billion in ten years, a gap that is very favorable for AppLovin.
The state of competition presents no ease, for AppLovin’s competition includes heavyweights such as Google, Amazon, and Facebook and depends mostly on app stores run by Google and Apple. These realities, however, have not prevented the firm from recording a remarkable increase in its market share where its market capitalization has nearly gone up to six times in recent years.
The founder and Chief Executive Officer of AppLovin, Adam Foroughi is likely to benefit greatly if the company continues to prosper – his shares are reportedly worth around five billion dollars at present. The outlook is bright, but with the wariness of the stock market, analysts are looking forward to the next earnings report skeptically in order to make sure that the recent spike in stock prices is rational.