Key Points
Mr. Market was expressing some affection for AppLovin (NASDAQ: APP) over the past few trading days. Shares of the adtech company were rising by over 10% week to date as of late Thursday evening. A highly positive initiation of coverage from an analyst was a major reason for the pop.
One strong move by a pundit
This occurred Monday morning, when Andrew Marok of Raymond James launched his tracking of AppLovin’s equity with a strong buy recommendation. Consistent with this highly optimistic rating, he set a price target of $640 per share on the specialized tech stock. That’s more than 21% higher than its most recent closing price.
According to reports, a key reason for Marok’s bullishness is his general view that the e-commerce advertising market will continue to expand. That’s fortunate for AppLovin, as in late June the company effectively opened its self-serve platform to all advertisers (previously, a referral was required).
The platform’s new name, AppLovin Ads, is buttressed by the greatly expanded Axon artificial intelligence (AI) model that powers it. Having moved from its previous narrow focus on mobile gaming, the platform is now available as a tool for the immense and ever-growing e-commerce crowd.
The analyst added that he’s expecting revenue growth of over 40%, accompanied by earnings before interest, taxes, depreciation, and amortization (EBITDA) margins topping 80%.
Pricey but worth it
I think the thrust of Marok’s argument is compelling and realistic. AppLovin is rapidly becoming a double threat, with its core mobile app advertising business and its continued push into e-commerce making for quite a potentially high-growth combination. This stock isn’t cheap, either on price or valuations, but it’s one of those companies that has an excellent chance of justifying such levels.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
