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Chinese (Traditional)AppLovin Corporation APP will report its fourth-quarter 2024 results on Feb. 12, after the bell.
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The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at $1.28, indicating 161.2% growth from the year-ago reported quarter. The consensus estimate for revenues stands at $1.26 billion, implying 32.3% year-over-year growth.
Two estimates for the to-be-reported quarter have been revised upward over the past 30 days versus no downward revisions. Over the same period, the Zacks Consensus Estimate for the quarter’s earnings has increased slightly.
The company has an impressive earnings surprise history. Earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an earnings surprise of 26.2%, on average.
Q4 Earnings Beat Seems Likely for APP
Our proven model predicts a likely earnings beat for APP this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
APP has an Earnings ESP of +1.12% and a Zacks Rank #2.
You can see the complete list of today’s Zacks #1 Rank stocks here .
Software PlatformShould Drive Performance Growth
We expect year-over-year improvement in the company’s top line in the to-be-reported quarter to be driven mainly by an increase in the Software Platform. The consensus estimate for the Software Platform revenues is pegged at $892.7 million, indicating 54.8% year-over-year growth. The consensus mark for Appsrevenuesis pegged at $367.72 million, suggesting 1.8% year-over-year growth.
The consensus mark for the Software Platform’s adjusted EBITDA is pegged at $683.7 million, suggesting 62.7% year-over-year growth. APP’s adjusted EBITDA is expected to increase 35.5% year over year.
APP Stock is in a Great Mood
APP has rallied a massive 466.5% in the past six months, significantly outperforming the industry's 78.3% rally. This is in line with its competitors in the in-game mobile advertising space, as Alphabet Inc. GOOGL has gained 20.5%, and Meta Platforms META has surged 45.6% in the same time frame.
Despite such an impressive rally, the stock is in the undervalued zone. Based on training 12-month EV-to-EBITDA, APP is trading at 66.21X, way below the industry’s 96.27X.
Investment Risk and Rewards for APP
AppLovin's recent financial results underscore its strong fundamentals and impressive growth trajectory. The company has achieved remarkable revenue growth by leveraging its AXON 2.0 technology and strategic expansion in gaming studios. In the third quarter of 2024, revenues increased 39% year over year and 11% sequentially, reflecting robust operational performance and market demand.
The company's profitability metrics also demonstrate significant improvement. Adjusted EBITDA surged 72% year over year and 20% sequentially during the quarter, underscoring the efficiency of its business model. Net income saw an exceptional 300% increase from the same quarter in 2023, along with a 40% sequential rise, highlighting AppLovin’s ability to convert revenue growth into bottom-line gains effectively.
For 2023, the company reported a 76% year-over-year revenue increase and a 41% rise in adjusted EBITDA. These figures highlight its capacity to capitalize on market opportunities, especially within the gaming and in-app advertising segments, while maintaining operational efficiency.
However, potential risks persist. The growth in the in-game advertising segment may face challenges, and the uncertain impact of the company’s ventures outside gaming could introduce volatility. Nonetheless, AppLovin's strategic focus on innovative technology and expansion within the gaming industry positions it well for sustained growth. With AXON 2.0 driving operational efficiencies and a diversified approach to revenue generation, the company is poised to maintain its growth momentum, making it an attractive option for long-term investors.
APP Stock is a Buy
Given AppLovin’s impressive financial performance, growth potential, and undervalued stock price, it presents a strong buying opportunity for investors. The combination of strong revenue and earnings growth, coupled with increasing analyst confidence, makes APP a compelling investment. While the stock has surged considerably, its current valuation suggests there is still room for further upside.
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