Industry Overview - The technology services industry is mature, with demand for services in good shape, and revenues, income, and cash flows are expected to gradually return to pre-pandemic levels, enabling stable dividends for most players [1] - The global shift toward digitization is creating opportunities in markets such as 5G, blockchain, and AI, with companies adopting generative AI, machine learning, and data science to gain competitive advantages [4] - The business software industry is benefiting from strong demand for multi-cloud-enabled software solutions as companies transition from legacy platforms to modern cloud-based infrastructure [4] Company Highlights AppLovin Corp. (APP) - AppLovin is a software-based platform for mobile app developers, enhancing marketing and monetization of apps [6] - The introduction of AI-powered AXON 2.0 technology and strategic expansion in gaming studios have significantly boosted revenue growth [7] - AppLovin's expected revenue and earnings growth rates for the current year are 16% and 84.8%, respectively, with a Zacks Consensus Estimate for current-year earnings improving by 0.1% in the last seven days [8] - The average short-term price target for AppLovin shares indicates a potential increase of 37% from the last closing price of $341.64, with a maximum upside of 90.3% [8] Duolingo Inc. (DUOL) - Duolingo operates as a mobile learning platform offering courses in 40 different languages and provides a digital language proficiency assessment exam [10] - The company utilizes AI applications to personalize and automate the learning process, with tools like Birdbrain analyzing real-time user performance [11] - Duolingo's expected revenue and earnings growth rates for the current year are 33.5% and 54.3%, respectively, with the Zacks Consensus Estimate for current-year earnings improving by 2.1% over the last 60 days [12] - The average short-term price target for Duolingo shares indicates a potential increase of 24% from the last closing price of $391.86, with a maximum upside of 53.1% [12]

Core Insights - The article discusses the challenges faced by major tech companies in achieving profitability from AI investments, highlighting significant losses reported by OpenAI and xAI while emphasizing the potential of the digital advertising sector to be transformed by AI technologies [1][2]. Group 1: AI Investment and Profitability - Since the launch of ChatGPT in November 2022, the five major cloud tech giants (Amazon, Microsoft, Google, Meta, and Oracle) have invested approximately $477 billion in AI-related capital expenditures, with projections suggesting this could rise to $1.15 trillion by 2025-2027 [2]. - OpenAI is expected to generate $5.5 billion in revenue for 2024 but will incur a loss of $5 billion, while xAI anticipates $500 million in revenue for 2025 with a loss of $13 billion [2]. - Nvidia stands out as a significant beneficiary in the current AI capital cycle, with its data center market share soaring from 15% in 2018 to 85% in 2024 [2]. Group 2: Digital Advertising as a Key Sector - Digital advertising is identified as one of the most mature fields for AI product development and user adoption, with an anticipated restructuring of a $470 billion profit pool in the advertising industry [3]. - The penetration rate of digital advertising has increased from 40.8% in 2017 to approximately 69% in 2024, with expectations of further acceleration driven by AI, potentially leading to a $170 billion shift from traditional to digital channels between 2025 and 2028 [4]. - Generative AI is projected to significantly reduce the costs associated with creative advertising development, potentially unlocking a market value of $114 billion [5]. Group 3: Profit Pools and Market Dynamics - AI technologies are expected to compress the advertising technology intermediary space, threatening approximately $25 billion in profits as large AI platforms streamline the advertising technology value chain [6]. - The traditional advertising agency model may be disrupted by AI, with the global advertising agency market estimated at around $161 billion, as companies like Meta aim for complete automation of the advertising process [7]. - Google’s Performance Max and Meta’s Advantage+ are leading AI advertising products, with adoption rates in the U.S. rising significantly, indicating that large platforms are likely to benefit the most from AI disruptions due to their data, technology, and capital advantages [8].

Key Takeaways AppLovin's Axon 2 and Wurl acquisitions are powering major gains across mobile and connected TV ads. SPOT's AI tools like Wrapped and AI DJ boost engagement, loyalty and more personalized ad delivery. APP's EPS estimates are rising sharply, while SPOT's are trending down despite stronger forward valuation.Both Spotify Technology S.A. (SPOT) and AppLovin Corporation (APP) are leveraging AI within their respective ecosystems, offering compelling ad-tech strategies.Spotify's AI features are con ...

The AppLovin Corporation logo appears on a smartphone screen in this illustration photo in Reno, ... More United States, on December 20, 2024. (Photo by Jaque Silva/NurPhoto via Getty Images)NurPhoto via Getty Images AppLovin (NASDAQ:APP), a firm that assists mobile app developers in publishing and promoting their applications, has excelled over the past year, though it has experienced some ups and downs in 2025. While the stock dropped nearly 57% from the peaks observed in early February 2025 following a r ...

Key Takeaways AppLovin stock has jumped 41% in 3 months, outpacing industry and major digital ad players. Axon 2 has boosted ad spend to a $10B run rate and fueled rapid MAX publisher base growth. Q1 2025 results show 40% revenue growth and 144% net income rise, with strong analyst projections for 2025.AppLovin Corporation (APP) has delivered a stunning 50% surge over the past three months, significantly outperforming the industry’s 21% rally. In contrast, heavyweights in the in-game mobile advertising sp ...

Market Overview - Wall Street experienced a significant rally in May, driven by expectations of a U.S.-China trade deal and delays in tariff imposition by the Trump administration on the European Union, which boosted confidence in equities [1] - The market rally is expected to continue in June, supported by declining inflation rates, with the personal consumption expenditures price index rising only 0.1% month-over-month and 2.1% year-over-year, marking its lowest level since 2025 [4] Recommended Growth Stocks - Five growth stocks are recommended for June, all of which have shown double-digit returns in the last month and possess a favorable Zacks Rank [2][3] - The recommended stocks are AppLovin Corp. (APP), Amphenol Corp. (APH), Intuit Inc. (INTU), Carvana Co. (CVNA), and Stantec Inc. (STN), each with a Zacks Rank 1 (Strong Buy) and a Growth Score of A or B [3] AppLovin Corp. (APP) - AppLovin is focused on enhancing marketing and monetization for mobile app developers through its software-based platform [7] - The company reported strong fundamentals, with an expected revenue growth rate of 24.3% and earnings growth of 85.2% for the current year, driven by its AI-powered AXON 2.0 technology [10][9] Amphenol Corp. (APH) - Amphenol provides connectivity solutions utilizing AI and machine learning technologies, with a diversified business model that supports growth across various sectors [11][12] - The company anticipates a revenue growth rate of 32.3% and earnings growth of 40.7% for the current year, bolstered by increased defense spending and the Andrew acquisition [13] Intuit Inc. (INTU) - Intuit benefits from steady revenues across its Online Ecosystem and Desktop business segments, with strong performance in its Credit Karma and cloud-based services [14][15] - The expected revenue growth rate for Intuit is 14.8%, with earnings growth projected at 18% for the current year [17] Carvana Co. (CVNA) - Carvana's acquisition of ADESA's U.S. operations has enhanced its logistics and auction capabilities, positioning it for significant growth in the used car market [18] - The company expects a revenue growth rate of 31.4% and more than 100% earnings growth for the current year, with a focus on improving operational efficiency [20] Stantec Inc. (STN) - Stantec provides a range of professional consulting services in planning, engineering, and environmental sciences, focusing on infrastructure and facilities projects [22][23] - The expected revenue growth rate for Stantec is 11.1%, with earnings growth projected at 18.6% for the current year [24]

Market Overview - U.S. stock markets closed the first quarter of 2025 negatively after two years of a bull run, with the technology sector, especially AI-related stocks, being the most affected due to the Federal Reserve's unclear stance on interest rates and recession fears [1] - In the first half of the second quarter of 2025, Wall Street experienced increased volatility due to the Trump administration's tariffs and trade policies impacting the U.S. economy and inflation [2] AI Stock Recommendations - Despite market headwinds, several AI stocks that underperformed in the first quarter have shown significant improvement recently, with five AI stocks recommended for investment based on favorable Zacks Rank [2][3] Company-Specific Insights AppLovin Corp. (APP) - AppLovin is focused on providing a software platform for mobile app developers, enhancing marketing and monetization [6] - The company reported strong fundamentals, with an expected revenue growth rate of 24.3% and earnings growth rate of 85.2% for the current year, alongside a 25.6% improvement in earnings estimates over the last 30 days [8] Amphenol Corp. (APH) - Amphenol specializes in connectivity solutions utilizing AI and machine learning technologies, benefiting from a diversified business model [9][10] - The company anticipates a revenue growth rate of 32.3% and earnings growth rate of 40.7% for the current year, with a recent 1.5% increase in earnings estimates [11] Arista Networks Inc. (ANET) - Arista Networks is positioned for growth with its AI networking solutions and a focus on cloud and data center architecture [12][13] - The expected revenue growth rate is 18.7% and earnings growth rate is 12.8% for the current year, with a 4% improvement in earnings estimates recently [14] Broadcom Inc. (AVGO) - Broadcom is experiencing strong demand for its networking products and AI accelerators, with projected AI revenues for Q2 2025 expected to rise 44% year-over-year to $4.4 billion [15][16] - The company forecasts a revenue growth rate of 21% and earnings growth rate of 35.5% for the current year, with a 0.6% increase in earnings estimates [19] Twilio Inc. (TWLO) - Twilio is a leading provider of cloud communications and is focusing on generative AI to enhance customer engagement [20][21] - The expected revenue growth rate is 7.8% and earnings growth rate is 21.3% for the current year, with a 6% improvement in earnings estimates [24]

Core Viewpoint - AppLovin has attracted controversy due to bearish reports from short sellers, yet a significant investment from billionaire Chase Coleman indicates strong confidence in the company's future growth potential [1][3]. Investment Activity - Chase Coleman of Tiger Global Management purchased nearly $575 million worth of AppLovin stock, making it his largest new position in the first quarter, representing 1.7% of his portfolio and ranking as his 16th-largest holding [2][3]. Business Model and Technology - AppLovin operates an advertising platform for gaming app companies and is selling a legacy portfolio of gaming apps. The introduction of Axon 2, an AI-based advertising technology, is expected to drive substantial revenue growth [5][8]. - Axon 2 utilizes predictive machine learning to enhance ad targeting, bidding, and placement, aiming to identify gamers likely to engage with ads and maximize return on ad spending [6][8]. Financial Performance - In 2022, AppLovin generated $2.8 billion in revenue, which is projected to grow to $4.7 billion by 2024. In Q1 2023, revenue increased by 40% to $1.48 billion, with advertising revenue surging 70% to $1.16 billion [9]. - The company's gross margin improved significantly, rising from 55.4% in 2022 to 75.2% in 2024, and further to 81.7% in Q1 2023 [10]. Competitive Landscape - AppLovin's growth appears to be at the expense of competitors like Unity Software, which has seen a decline in revenue in its adtech business [11]. - The company anticipates long-term revenue growth from gaming clients in the 20% to 30% range, with plans to expand Axon 2's application to the e-commerce sector [12]. Valuation - Despite significant stock gains over the past two years, AppLovin's valuation remains reasonable, with a forward price-to-earnings (P/E) ratio of just under 45 and a price/earnings-to-growth (PEG) ratio of 0.56, indicating potential undervaluation [13].

Core Viewpoint - AppLovin Corporation (APP) has experienced significant stock volatility, with a 26% decline over the past three months, contrasting with a 15% decline in the industry, but has recently rebounded with a 64% increase in the past month, indicating potential recovery in the digital advertising market [1][2][3] Group 1: Market Performance - APP's stock has declined 26% over the last three months, worse than the industry's 15% decline [1] - Competitors like Alphabet and Meta Platforms have also faced declines of 11% and 10%, respectively, during the same period [1] - In the past month, APP's stock surged 64%, while Alphabet and Meta Platforms gained 8% and 31%, respectively, suggesting a potential market recovery [2] Group 2: Strategic Initiatives - AppLovin is transitioning to a pure-play advertising platform, focusing on high-growth, high-margin segments [4] - The $900 million sale of its gaming unit to Tripledot Studios allows APP to concentrate on ad technology, aligning with its vision for the global digital advertising market [4] - The company is investing in automation and developing advanced tools to enhance customer efficiency and maximize ad performance [4] Group 3: Financial Performance - AppLovin's first quarter of 2025 saw revenues surge 40% year over year, with adjusted EBITDA jumping 83% and net income skyrocketing 144% [5] - For the full year 2024, revenues climbed 43% year over year, while adjusted EBITDA surged 81%, indicating strong market demand and operational efficiency [5] Group 4: Earnings and Revenue Projections - The Zacks Consensus Estimate for second-quarter 2025 earnings is $2.01 per share, reflecting a 125.8% increase from the prior-year quarter [8] - For the full years 2025 and 2026, earnings are expected to grow by 85.2% and 41.9%, respectively [8] - The Zacks Consensus Estimate for second-quarter 2025 revenues is $1.45 billion, representing a 33.9% increase from the prior-year quarter [11]

Market Overview - Wall Street has experienced significant volatility over the past two months due to sticky inflation, weak economic data, and the imposition of reciprocal tariffs by the Trump administration, raising concerns about a potential near-term recession in the U.S. economy. All three major stock indexes are currently in negative territory year to date [1]. Investment Opportunities - Three U.S. corporate giants with a market capitalization of nearly $100 billion or more and a favorable Zacks Rank have provided positive returns in the past month. These companies are Amphenol Corp. (APH), AppLovin Corp. (APP), and Philip Morris International Inc. (PM), all holding a Zacks Rank 1 (Strong Buy) [2]. Amphenol Corp. (APH) - Amphenol provides connectivity solutions utilizing AI and machine learning technologies, offering high-density, high-speed connectors and cables optimized for signal integrity and thermal performance [4]. - The company benefits from a diversified business model, with strong demand across Commercial Air, Industrial, and Mobile devices, alongside defense technologies driving top-line growth [5]. - Amphenol's expected revenue and earnings growth rates for the current year are 30% and 38.6%, respectively, with the Zacks Consensus Estimate for current-year earnings improving by 12.9% in the last 30 days [6]. AppLovin Corp. (APP) - AppLovin operates a software-based platform for mobile app developers, enhancing marketing and monetization capabilities both domestically and internationally [7]. - The introduction of AI-powered AXON 2.0 technology and strategic expansion in gaming studios have significantly boosted revenue growth, while the Ai-enabled Audience+ marketing platform enhances reach into direct-to-consumer and e-commerce sectors [8]. - AppLovin's expected revenue and earnings growth rates for the current year are 24.3% and 70.6%, respectively, with the Zacks Consensus Estimate for current-year earnings improving by 13.7% in the last seven days [10]. Philip Morris International Inc. (PM) - Philip Morris has shown strong pricing power and an expanding smoke-free product portfolio, making significant progress in its smoke-free transition with products like IQOS and ZYN [11]. - The company anticipates robust growth in 2025, driven by increasing demand across all product categories, with an expected volume growth of 2% and smoke-free products projected to expand by 12-14% [12]. - Philip Morris's expected revenue and earnings growth rates for the current year are 8.1% and 13.7%, respectively, with the Zacks Consensus Estimate for current-year earnings improving by 4.2% over the last 30 days [13].