Is It Too Late to Buy AppLovin Stock After Its Nearly 300% Rise Over the Past Year?

Core Viewpoint - AppLovin has faced scrutiny from multiple short-seller reports but reported strong Q1 results, leading to a significant stock increase of nearly 288% over the past year [1] Financial Performance - Q1 advertising segment revenue increased by 73% to $1.16 billion, while overall revenue rose by 40% to $1.48 billion, surpassing the $1.38 billion consensus [4] - Apps portfolio revenue decreased by 14% year over year to $325 million, but segment-adjusted EBITDA grew by 9% to $62 million [5] - Gross margin improved to 81.7% from 72.2% a year ago, with sales and marketing expenses reduced by 19% year over year [6] - Earnings per share (EPS) increased from $0.67 to $1.67, exceeding the $1.45 consensus, despite a $189 million non-cash goodwill impairment charge [7] - EBITDA surged by 82% year over year to $1 billion, with advertising-adjusted EBITDA rising by 92% to $943 million [7] - Operating cash flow was $832 million, and free cash flow was $826 million, with net debt at $3.2 billion [7] Future Outlook - Q2 advertising revenue is forecasted to be between $1.195 billion and $1.215 billion, indicating growth of 68% to 71% [8] - Q2 advertising-segment adjusted EBITDA is expected to range between $970 million and $990 million, up from $520 million a year ago [8] - The company is expanding into web-based advertising, currently reaching less than 0.1% of the potential market, with plans for a broader release after refining tools [9] - A self-service dashboard for select customers will be launched to automate processes, allowing new advertisers to set objectives and budgets [10] - Web-based advertising is projected to account for 10% of advertising net revenue this year [11] Valuation - Despite a 288% annual gain, AppLovin stock is considered attractively valued, with a forward price-to-earnings (P/E) ratio of about 41 times 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of 0.5, indicating potential undervaluation [13] Growth Potential - The company continues to experience rapid revenue and earnings growth, with strong cash-flow generation [14] - Successful expansion into e-commerce advertising could lead to further robust growth [14] Short-Seller Reports - The short-seller reports from Fuzzy Panda Research, Muddy Waters, and Culper Research raise concerns about the legitimacy of AppLovin's AI adtech platform, Axon 2.0, but lack concrete evidence of wrongdoing [2][15] - AppLovin's CEO has denied the allegations, suggesting that the complexity of Axon 2.0 allows for misinterpretation by short sellers [3]