Lovin' That App: Can This Momentum Stock Continue Higher After 712% Run?

Company Overview - AppLovin operates a mobile app marketing platform that provides tools for developers to improve monetization and marketing of their content, both in the US and internationally [1] - The company offers e-commerce advertising services that match advertiser demand with publisher supply through auctions, along with bidding software to optimize advertising inventory value [2] - AppLovin's 'Adjust' platform provides analytics, visibility, and insights to help marketers grow their apps from early stage to maturity [2] Business Strategy and Diversification - Historically driven by mobile game advertising, AppLovin is diversifying its customer base, with a newer e-commerce beta program that includes several hundred advertisers, including beauty and cosmetics companies [3] - The company's growth opportunity lies in scaling its advertising products to non-gaming advertisers, leveraging its expertise in mobile game advertising [5] Financial Performance - In Q3, AppLovin reported earnings of $1.25 per share, a 317% increase year-over-year, with sales surging 39% to $1.2 billion [7] - The company guided higher for Q4, forecasting revenue of $1.25 billion, exceeding analyst expectations of $1.18 billion [7] - AppLovin has surpassed earnings estimates in the past six quarters, with a trailing four-quarter average earnings surprise of 26.2% [8] - Analysts have raised full-year EPS estimates for 2025 by 6.25% to $6.12 per share, representing a potential growth rate of 50.6% year-over-year, with revenues expected to climb 23.5% to $5.68 billion [8] Analyst Sentiment and Market Performance - Analysts remain bullish on AppLovin, with UBS highlighting positive initial results from the e-commerce beta program [4] - Oppenheimer reiterated an 'outperform' rating, emphasizing that AppLovin's total addressable market could double in the short term if growth opportunities are seized [6] - AppLovin's stock delivered a 712% return in 2024 and continues to show relative strength, breaking out to the upside with increasing volume and buying pressure [9][12] - Empirical research shows a strong correlation between near-term stock movements and earnings estimate revisions, with AppLovin benefiting from positive revisions [13] Growth Potential and Investment Appeal - AppLovin is backed by a leading industry group and a history of earnings beats, making it a compelling investment with durable fundamentals and an appealing technical trend [14] - The company ranks highly in the Zacks Growth Style Category, indicating potential for outperformance based on strong sales and earnings growth [14] - Recent positive earnings estimate revisions are expected to create a 'floor' for the stock, reducing the likelihood of sudden downside moves [15]