Key Takeaways
- AppLovin stock jumped 27% after third-quarter revenue rose 55% and its fourth-quarter guide beat estimates.
- CEO Adam Foroughi blamed last quarter’s miss on AppLovin itself, and its new ad models are only partly rolled out.
- Unity also surged as advertisers favor ads with measurable returns.
- Down 60% this year, AppLovin trades well below its five-year average forward P/E, so the selloff looks overdone.
AppLovin (APP) stock is up 27% today on a third quarter that beat on revenue, earnings and guidance.
Unity Software (U) reported within hours, and it shows advertisers backing ads that prove they pay off.
A record quarter, and a bigger guide
AppLovin reported after Wednesday’s close:
- Revenue rose 55% to $2.18 billion, against $2.07 billion expected.
- EPS of $4.30 beat the $4.03 estimate.
- Fourth-quarter revenue guidance of $2.37 billion-$2.40 billion topped the $2.25 billion consensus.
Three months ago, a slight miss and fears of rivals sent the stock down 20% in a day. Foroughi put it on AppLovin itself: “It was our own foot fault.”
And its next-generation models aren’t fully out: “This was a partial rollout. The transition is still in front of us.”
Analysts already expected earnings per share to climb steeply through 2028:
With a fourth-quarter guide more than $100 million above consensus, I’d expect those estimates to go up from here.
Rivals are winning too
Unity’s quarter backs up Foroughi’s case that ad spending isn’t “zero-sum.” Its Vector ad model grew 126% from a year earlier, and Unity guides its Grow revenue to more than double in the fourth quarter. Yet it trades at 26x forward earnings, twice AppLovin’s multiple going into the report. Can it keep that pace once AppLovin finishes its rollout?
Snap (SNAP) reported within hours too. Its revenue rose just 14% to $1.72 billion, as direct-response ads grew and brand ads lagged. AppLovin is growing almost four times as fast, and at 7.5x forward earnings, investors doubt Snap can close that gap.
TIKR tracks 33 analysts on AppLovin. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on AppLovin, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See AppLovin’s Analyst Ratings
The selloff looks overdone
AppLovin kept 66 cents of net income from every dollar of revenue in the quarter, up from 59 cents a year earlier. Yet the stock went into the report at about 13x forward earnings, around half its five-year average of 25x:
At today’s price, it’s about 15x.
Frankly, the selloff that took 60% off the stock this year priced in a slowdown that never showed, and today’s jump only starts to fix that.
Foroughi named the risk himself: model gains “won’t land on a perfect quarterly schedule.” February’s fourth-quarter report will show what the rest of the rollout adds.
So what is AppLovin stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
