Why AppLovin shares rose another 30% last month

Shares of a company that generates revenue from mobile apps AppLovin (NASDAQ: APP) rose 29.8% in October, according to data from S&P Global Market Intelligence. It’s a big move considering the company hasn’t reported any financial results or made any other announcements. Instead, the stock went higher thanks to Wall Street.

For context, AppLovin had a market cap of just $3 billion at the beginning of 2023. That’s too small to attract much attention from the analyst community. However, thanks to strong financial results, AppLovin’s stock is up 278% in 2023, and so far in 2024, the stock is up more than 300%. In short, it’s now a much bigger company and analysts had to start tracking it on behalf of their clients.

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In October, many analysts started following AppLovin for the first time or adjusted their price targets. And in many cases, those price targets were revised upward.

When leading analysts do this, it leads to more attention and exposure to stocks like AppLovin. As Wall Street’s bullish commentary landed on more radars, AppLovin stock continued its climb in October.

In 2023, AppLovin grew its revenue by almost 17%, and its profits changed from a loss of $193 million in 2022 to a net profit of $357 million in 2023. In the first half of 2024, these trends intensified. Year-to-date sales are up another 46%, delivering a net profit of $546 million in the first half of the year.

AppLovin’s high-margin software revenue, powered by artificial intelligence (AI), is driving both growth and profits. In short, the company is simply performing too well to be ignored any longer. And many analysts believe there is still plenty of room for growth.

AppLovin will report third-quarter 2024 financial results after the market closes on November 6. At the midpoint of management’s guidance, the company believes sales will grow 30% year over year. Additionally, it expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $630 million to $650 million, which would be a quarterly record.

It should be noted that AppLovin just passed the one-year anniversary of the AI ​​software update that fueled its current growth rate, so it won’t have that catalyst anymore. Management believes it can grow 20% to 30% annually over the long term. But part of this assumes that it can diversify so that it is no longer primarily used to monetize gaming apps, but can help monetize apps in other categories and on other platforms, such as connected TV.

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