One of Wall Street’s biggest winners last year wasn’t a chipmaker or a megacap tech giant. It was an ad-tech company that soared more than 700%.
That stock is AppLovin (APP) .
The California-based adtech platform for mobile gaming apps went public in 2021 and rode the wave of online game excitement during the Covid era.
Since then, it has built a position in the crowded digital ad market, competing with hyperscalers like Alphabet (GOOGL) and Meta (META) . Wall Street has rushed in, betting on the company’s AI-driven ad technology, which lets advertisers target users more effectively.
The remarkable stock performance raised questions about the company’s business and stock growth.
Image source: AppLovin/TheStreet
Skeptics question AppLovin’s AI hype
In February, Culper Research revealed a short position in AppLovin, saying its surge last year was driven by investor enthusiasm for Axon 2.0, an ad-search engine. Short sale means betting a security’s price will decline.
“AppLovin has used Axon 2.0 largely as a promotional tool — a smokescreen to hide the true drivers of its mobile gaming and e-commerce initiatives, neither of which have much to do with AI,” the firm wrote.
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After the short reports, CEO Adam Foroughi defended the company’s technology in a blog, calling the reports “littered with inaccuracies and false assertions.”
“A few nefarious short-sellers are making false and misleading claims aimed at undermining our success, and driving down our stock price for their own financial gain,” he wrote.
Despite the skepticism, AppLovin shares are up nearly 50% year to date.
AppLovin posts strong earnings and outlook
On August 6, AppLovin posted strong second-quarter results, with net income more than doubling to $820 million, or $2.39 a share, up from $310 million, or 89 cents, a year earlier. Wall Street had expected earnings of $2.01 a share.
Revenue climbed 77% to $1.26 billion, beating forecasts of $1.22 billion.
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For the third quarter, AppLovin projected revenue between $1.32 billion and $1.34 billion, above consensus estimates of about $1.31 billion.
AppLovin stock gained 11% on Aug. 7 following the earnings. The stock closed at $483.75 on Aug. 28, just 8% below its all-time high stock price at $525.15 on Feb. 14, 2025.
Analyst raises AppLovin stock price target by $125
Scotiabank raised its price target on AppLovin to $575 from $450 and reiterated an outperform rating, thefly.com reported on Aug. 28.
AppLovin is expanding beyond mobile gaming ads into e-commerce. Scotiabank analysts expect e-commerce to become a larger part of AppLovin over time.
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Foroughi said during the earnings call that AppLovin has been carefully managing the rollout of its e-commerce business. “[For e-commerce,] we went from a state where we ramped it in Q1 and then controlled, as I said, on the advertiser onboarding while we got these tools ready to go,” he said.
He explained that e-commerce is holding at around 10% of revenue and is unlikely to rise above that level for now, since the company’s gaming segment is growing faster.
Scotiabank also pointed to more margin improvements as management optimizes its cost structure and returns more capital to shareholders through buybacks.
TipRanks data shows Wall Street has an average price target for AppLovin of $528.94, with estimates ranging from $425 on the low end to $650 on the high end. That implies about 9.3% upside from the last close at $483.75.
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