Key Takeaways
- AppLovin has lost 56% over the past year. On Oct. 12, Oppenheimer cut its price target to $490 from $560 and kept its Outperform rating, which puts the target 80% above the share price.
- Management said its gaming ad models improved less than usual in the second quarter, and then AppLovin lost a court round against Unity and was hit with a securities class action.
- Oppenheimer’s target sits on the $484 consensus and implies 26.4x forward earnings, near the stock’s 5-year average of 25.8x, but 2027 earnings estimates have been falling.
- The call is plausible but stretched. The next test is the third-quarter report, with revenue guided to $2.06 billion to $2.09 billion.
AppLovin (APP) has lost 56% over the past year. On Oct. 12, Oppenheimer analyst Martin Yang cut his price target to $490 from $560 and kept his Outperform rating. Even after the cut, the target is 80% above this afternoon’s $271.84.
The lift that didn’t come
AppLovin’s second-quarter revenue still rose 53% to $1.92 billion, so the trouble was in gaming. On the Aug. 5 call, CEO Adam Foroughi said the models that place the company’s ads improved less than usual: “In this case, in Q2, we didn’t have the same amount of uplift that we normally have in any other prior quarter.”
Then, on Oct. 1, a San Francisco court denied AppLovin’s request for a restraining order against the Ad Quality SDK from Unity Software (U), Wedbush analyst Alicia Reese reported. A securities class action alleges AppLovin misled investors about its AI models and its AI video creative tool.
Wall Street is cutting, but still says buy
Jefferies, BofA, and Morgan Stanley have each cut their price targets this month as well, and the consensus target has moved lower right along with them…
The consensus target now sits at $484, down from $626 a year ago. Individual targets are spread widely, from $325 to $790, and Oppenheimer’s $490 lands right around the consensus. Ratings have held up better, with 20 Buys and 7 Outperforms against 6 Holds, though there were only 3 Holds on June 30.
Does $490 add up?
Analysts still expect normalized EPS to climb from $10.64 in 2025 to $16.59 this year and $25.06 by 2028…
But those estimates are slipping. Yahoo Finance’s consensus for 2027 is $19.96 a share, down from $21.19 90 days ago.
The stock is cheap against its own history, though…
At the Oct. 12 close, AppLovin traded at 14.6x forward earnings, against a 5-year average of 25.8x. Divide Oppenheimer’s $490 by the $18.55 a share analysts expect over the next twelve months, and you get 26.4x, right about that average.
Plausible, but it needs a re-rating
Nobody can size the class action yet.
I think Oppenheimer’s call is plausible but stretched. It only asks investors to pay an average multiple on earnings analysts already expect. But I don’t see them paying that while estimates fall and a lawsuit questions AppLovin’s AI claims.
The next test is the third-quarter report, where AppLovin guided to revenue of $2.06 billion to $2.09 billion. If it lands there, with the gaming lift Foroughi said arrived early in the quarter, $490 starts to look a lot more reasonable.
So what is AppLovin stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what AppLovin could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
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