Core Insights - AppLovin Corporation is becoming a significant player in digital advertising, particularly in transforming mobile gaming into a key channel for e-commerce engagement [1][2] - Bank of America projects that e-commerce ad spending will increase from approximately $1.8 billion in 2025 to $6.8 billion in 2026, indicating strong growth potential for AppLovin [2] - The brokerage maintains a Buy rating with a price target of $860, suggesting a 36.6% upside from the current share price of $629.70 [1] Group 1: Market Dynamics - AppLovin's mobile gaming ecosystem is expected to effectively absorb the anticipated surge in e-commerce ad demand through 2026, supported by strong supply growth and improved conversion efficiency [1][2] - The MAX ad supply has been growing at a compound annual growth rate (CAGR) of approximately 20% since 2022, with potential acceleration to 34% year-on-year in 2026 [3] - There is a significant untapped opportunity, as 25-40% of mobile gaming engagement occurs in titles that currently do not display ads [3][4] Group 2: Financial Projections - Bank of America forecasts that AppLovin's sales will increase from $5.5 billion in 2025 to $9.1 billion in 2026, with EBITDA expected to rise from $4.5 billion to $7.6 billion during the same period [5] - Adjusted earnings per share are projected to grow from $9.71 in 2025 to $18.12 in 2026, and further to $23.95 in 2027 [6] - The valuation model assumes a 39x EV/2026E EBITDA multiple, reflecting premium growth prospects due to e-commerce ad adoption [6]