AppLovin (NASDAQ: APP) has had the kind of year investors dream about. The mobile app marketing and advertising platform, best known for its strength in mobile gaming has seen its stock rocket more than 5x over the past 12 months, fueled by relentless revenue growth and eye-popping profits.
With a move that big, the obvious question now is… has the stock already priced in the good news, or is there still room for this growth story to run?
Key Points
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AppLovin trades at very high multiples but analysts still expect EPS to grow more than 50% annually over the next 3–5 years.
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Sales and profits have surged, with Q2 revenue up 77% year over year and net income jumping 164%.
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APP is growing without adding debt, focusing on its core AI-driven advertising business, and consistently reducing its share count through aggressive buybacks.
A Price Tag That Makes Investors Blink
On the surface, calling AppLovin “undervalued” sounds like a stretch. Shares recently traded sub-$500, and at those levels APP changes hands at nearly 70x earnings, more than 30x sales.
Analyst sentiment remains positive and 15 of the 20 analysts covering APP still rate it a buy, but consensus targets now sit just a few percentage points above the current stock price.
Institutional investors also appear to be tapping the brakes a bit, with net selling outweighing buying since February. All of this suggests that on valuation alone, the easy money may already be behind us.
The Growth Story Is Hard to Ignore
Valuation only tells half the story, though. The other half is AppLovin’s staggering growth.
Revenue has been positive in nearly every quarter over the past two years, and recent numbers have been downright explosive. Q2 revenue came in at $1.26 billion and net income soared to $820 million.
Equally impressive, net income for over a year has grown by over 100% each quarter compared with the year before. In just one year, trailing 12-month profits leapt from $825 million to $2.43 billion.
Management is also making a bold move this year by selling its app portfolio for $400 million, freeing up resources to double down on its core advertising technology.
Financial Discipline Behind the Growth
One reason investors are warming to AppLovin is its ability to grow without overextending.
Despite the surge in revenue and earnings, long-term debt has held steady at about $3.5 billion. In other words, the leadership team hasn’t had to load up on borrowings to fuel its expansion, a sign of financial discipline often missing in high-growth stories.
On top of that, management has been aggressive with share buybacks. In Q2 alone, AppLovin repurchased $341 million, marking the ninth straight quarter of reducing its share count. For long-term investors, that consistent reduction in shares outstanding could boost earnings per share over time.
Can Growth Justify the Premium?
At today’s lofty valuation, AppLovin must deliver. The good news is Wall Street expects it to. Analysts project annualized EPS growth of more than 50% over the next three to five years, blistering by any standard.
One of the biggest drivers here is AppLovin’s use of artificial intelligence to optimize its advertising platform. AI has proven to be a natural fit for digital ad targeting, and AppLovin’s early moves in this space are already paying dividends.
A Fairly Valued Growth Rocket?
So, is AppLovin undervalued? Probably not in the traditional sense. The stock trades at steep premiums, and anyone buying today is paying up for a lot of future growth. But it’s firing on all cylinders and AI potentially extending its runway, the premium may be justified.
For investors with a long-term horizon, AppLovin looks more like a fairly priced growth rocket than an overinflated bubble. The combination of consistent execution, disciplined financial management, and a shareholder-friendly buyback program gives this company multiple levers to keep creating value.