Applovin-APP Stock Sinks 22% Over 3 Months: Is This a Buy-the-Dip Moment?

Core Viewpoint - AppLovin Corporation (APP) has experienced a stock decline of 22% over the past three months, which is slightly worse than the industry's overall decline of 18% [1]. However, the company has shown signs of recovery with an 8% rebound in the last month [2]. Group 1: Company Performance - AppLovin is transitioning to a pure-play advertising platform, focusing on high-growth, high-margin segments, highlighted by the $900 million sale of its gaming unit to Tripledot Studios [4]. - The latest earnings report indicates strong financial health, with revenues increasing by 44% year over year and 14% sequentially in Q4 2024 [5]. Adjusted EBITDA rose by 78% year over year and 17.5% sequentially, while net income surged by 248% from the prior year [5]. - For the full year 2024, revenues climbed 43% year over year, and adjusted EBITDA surged 81% [6]. Group 2: Future Projections - Management has guided for$ 1.4 billion in sales for Q1 2025, slightly above the Zacks Consensus Estimate of $1.37 billion [8]. - Analysts project strong earnings growth, with the Zacks Consensus Estimate for Q1 2025 earnings at$ 1.45 per share, reflecting a 116.4% increase from the prior year [9]. Earnings for 2025 and 2026 are expected to grow by 47.5% and 38.5%, respectively [9]. Group 3: Analyst Sentiment - Over the past 60 days, analysts have revised downwards their earnings estimates for 2025 and 2026 by 2.8% and 1.8%, respectively [11]. - APP currently trades at a forward 12-month price-to-earnings (P/E) ratio of 37.9, significantly higher than the industry average of 24.33, indicating a premium for future earnings [12]. Group 4: Conclusion - AppLovin's recent rebound, strong earnings growth, and strategic shift toward a high-margin ad tech model highlight its long-term potential [14]. However, caution is warranted due to recent downward earnings revisions and a valuation premium compared to industry peers [14].