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This mobile tech company has exploded in 2024, leaving investors wondering if they've missed the boat. But with cutting-edge AI, strategic acquisitions, and a rapidly expanding market, AppLovin's growth story might just be getting started. Discover the secrets behind their success, impressive financials, and why analysts believe this stock still has serious upside potential. Don't miss out on this deep dive into one of the hottest tech stocks of the year!

Today, we will discuss a stock from a profitable gaming industry portfolio, specifically the AppLovin stock.

An intriguing question: Is AppLovin Stock Soaring 242% Still a Buy?

And by the way, the gaming industry portfolio is on sale today with an 80% discount!

Today’s episode - “Not famous but great”

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What you need to know

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AppLovin Stock: Soaring 242% – Is it Still a Buy?

AppLovin Corporation (NASDAQ: APP) has emerged as one of the most successful stocks of 2024, delivering outstanding returns to its investors. In fact, AppLovin stock surged an impressive 242% over the past year, driven by its innovative use of artificial intelligence (AI), strategic business model, and its expansion into new verticals beyond mobile gaming. This has made AppLovin a popular choice among investors, and its growth story is far from over. Let's dive deep into what makes this company so successful and whether it's still a good time to invest.

What Is AppLovin?

At its core, AppLovin is a mobile technology company offering a comprehensive suite of tools designed to help app developers grow and monetize their apps. Its platform provides:

• User acquisition: Through its AppDiscovery tool, it helps apps attract new users.

• Monetization solutions: MAX assists app owners in optimizing ad revenue.

• Analytics: These provide developers with actionable insights to boost app performance.

In addition to these tools, AppLovin has created several hit mobile games, such as Wordscapes, Matchington Mansion, and Game of War. However, the company's real engine of growth lies in its software solutions, which have become the backbone of its expansion.

Why Has AppLovin Seen Such Success?

AppLovin's success in the past 18 months can be attributed to several key factors that have set it apart from competitors. The most notable include:

1. AXON 2.0: The introduction of this AI-powered advertising platform has been transformative. AXON 2.0 optimizes ad performance by significantly improving return on ad spend (ROAS). CEO Adam Foroughi described it modestly, stating it was "just better." But the impact was game-changing for advertisers, who quickly increased their spending on AppLovin’s platform due to its impressive performance.

2. MoPub Acquisition: AppLovin’s strategic acquisition of MoPub brought valuable data insights, particularly in the post-IDFA world, which has seen advertisers shift away from traditional tracking methods. This acquisition further solidified AppLovin’s competitive edge.

3. The Shift in Advertising Trends: There’s been a noticeable move away from linear TV advertising toward more interactive digital platforms. AppLovin’s stronghold in mobile gaming advertising has positioned it perfectly to capitalize on this shift, allowing it to attract more advertisers.

Valuation: What Justifies AppLovin's Growth?

Despite its recent meteoric rise, AppLovin's valuation is still grounded in growth potential. Its success stems from a highly profitable software business, which has grown by 75% year-over-year, reaching $711 million in Q2 2024. Management has forecasted long-term software revenue growth of 20-30%, which is driving optimism about the company’s future performance.

Here are some key growth drivers for AppLovin:

• Diversifying into new verticals: While gaming has been AppLovin’s primary focus, it has begun expanding into other markets, particularly e-commerce. In Q2 2024, it launched a pilot program allowing e-commerce websites to purchase in-app mobile game ad inventory, offering access to its vast user base of over a billion daily active users.

• Rising demand for programmatic advertising: The shift to programmatic bidding has enhanced the effectiveness of its MAX ad mediation platform, enabling steady quarter-over-quarter growth of 5-7%.

AppLovin’s Financial Health and Margins

A critical reason for AppLovin’s soaring stock price is its impressive financial performance. Key metrics like adjusted EBITDA margins, free cash flow (FCF), and return on invested capital (ROIC) have all shown significant improvement:

• Margins: In Q2 2024, AppLovin's adjusted EBITDA margin grew to 55.6%, up from 44.4% the previous year. Its software segment alone boasts rich EBITDA margins of 73.1%, contributing heavily to the company's bottom line.

• Free Cash Flow: With a TTM FCF margin of 35.6%, AppLovin has ample room to reinvest in growth, driving further expansion and innovation.

• Earnings Growth: With EPS growing by 304.5% YoY in Q2 2024, AppLovin is outperforming many other companies in the tech space.

Is AppLovin Stock Overvalued?

While AppLovin trades at 26.3x forward earnings, a premium compared to the broader tech sector, its valuation is more than justified when considering its growth rate. Its PEG ratio of 0.79 indicates that the stock may still be undervalued, especially given its potential to grow earnings by 33.4% annually over the next few years.

This impressive earnings growth highlights why the stock, even after its massive price increase, still offers upside. Investors are paying a higher price, but they are also getting a company delivering superior returns.

The Future Outlook for AppLovin

Looking forward, AppLovin’s prospects remain bright. Analysts expect continued growth in both revenue and profitability, fueled by:

• The AI-powered AXON platform: As more advertisers adopt this powerful tool, AppLovin’s revenue is set to keep climbing.

• Expansion into new sectors: The move beyond mobile games into e-commerce and potentially connected TV could open up vast new opportunities.

While some risks exist, including competition and potential shifts in the advertising landscape, AppLovin's innovative business model and focus on high-margin software solutions should help it maintain its growth trajectory.

Should You Invest in AppLovin Now?

Key considerations for potential investors:

• Strong Financials: AppLovin’s balance sheet is healthy, with $3 billion in net long-term debt, which is manageable given its strong cash flow.

• High Return on Investment: With a return on invested capital of 19%, AppLovin is proving it knows how to turn investment into profit.

• Solid Growth Prospects: Analysts remain optimistic, projecting 20-30% growth from its software business alone.

However, despite its stellar performance, some might wonder if it's too late to invest after such a rapid price increase. The consensus remains bullish, and with the company's performance consistently outpacing its valuation, AppLovin still looks like a solid buy.

Final Thoughts

AppLovin’s remarkable growth, driven by its AI-powered platform, strategic acquisitions, and expanding verticals, positions it as one of the best-performing tech stocks in 2024. Despite its stock price soaring over 200%, there is still room for upside, making it an attractive option for long-term investors.

The company’s strong margins, innovative tools, and expanding market presence reinforce the case for continued growth, even as the stock trades at a premium. For those seeking a high-growth tech stock, AppLovin remains a compelling investment.

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice. Investing involves risks, and past performance is not indicative of future results. Please consult with a financial advisor before making any investment decisions.

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Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.