This Year’s Best Growth Stock Isn’t What You Think It Is

Core Insights - AppLovin's total revenue for Q3 increased by 68% year-on-year to $1.4 billion, primarily driven by model upgrades in the gaming sector [1] - Adjusted EBITDA rose 79% YoY to $1.16 billion, with a remarkable margin of 82%, while net income surged 92% to $836 million [1] - The company has made significant strides in international expansion, enhancing its advertising reach ahead of schedule [1] Financial Performance - Free cash flow reached $1.049 billion, marking a 92% increase YoY, indicating strong profitability and disciplined capital management [7] - The company ended the quarter with $1.7 billion in cash and cash equivalents, and repurchased approximately 1.3 million shares for $571 million [7] - For 2025, revenue is projected to be between $1.57 billion and $1.6 billion, reflecting a sequential growth of 12% to 14% [8] Market Position and Growth Potential - AppLovin's inclusion in the S&P 500 has increased its visibility and is expected to attract long-term investors [9] - The company is recognized for its AI-powered ad platform, which enhances user acquisition for app developers, leading to higher returns on ad spend [2][5] - Analysts forecast a revenue increase of 22.1% to $5.7 billion and a doubling of earnings (up 106.4%) by 2025, with continued strong growth expected into 2026 [8] Analyst Ratings and Stock Performance - AppLovin stock has surged 122% year-to-date, outperforming many peers in the tech sector [4] - The stock holds an overall "Strong Buy" rating on Wall Street, with 19 out of 26 analysts recommending it as a "Strong Buy" [10][11] - The average target price is $720.46, with a high estimate of $860, suggesting potential for a 20% rally over the next 12 months [11]