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APP Stock Surges 89% in 6 Months: Hold for a Pullback or Buy?
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Key Takeaways
AppLovin has jumped 89% in six months while evolving into a broader multi-channel ad platform.
AppLovin's Q3 revenues hit $1.41B with strong EBITDA, cash flow and an expanded buyback plan.
AppLovin guides for sequential Q4 growth as advertiser demand and seasonal trends support results.
AppLovin Corporation (APP - Free Report) has surged 89% over the past six months, outpacing the broader industry’s modest 20% rally.
Image Source: Zacks Investment Research
The key question now is: does AppLovin still present an attractive entry point for investors, or is the stock already running hot? Let’s see
AppLovin Evolving Into a Multi-Channel Advertising Leader
AppLovin’s evolution from a mobile-first ad platform to a diversified advertising powerhouse is accelerating, supported by its expansion into web advertising and connected TV (CTV). A key catalyst behind this shift is the acquisition of Wurl, a streaming-focused content distribution and CTV monetization platform. Wurl enables AppLovin to extend its AI-driven AXON monetization engine beyond mobile apps and into high-growth areas such as smart TVs and streaming environments.
The CTV market continues to see rapid growth as viewers move away from linear television. Wurl’s infrastructure strengthens AppLovin’s ability to deliver targeted, measurable ad campaigns across CTV devices while complementing AXON’s predictive capabilities. Additionally, AppLovin’s growing focus on performance-driven advertising, where measurable outcomes such as conversions take precedence over raw impressions, creates deeper value for advertisers across mobile, web and emerging channels.
As user attention disperses across devices, AppLovin is positioning itself to offer advertisers a more unified platform that spans mobile, web and CTV. This approach diversifies revenue streams and reduces reliance on any single platform, strengthening strategic resilience. If executed effectively, this multi-channel shift could elevate AppLovin into a formidable competitor within the broader omnichannel advertising ecosystem.
Peers like The Trade Desk (TTD - Free Report) and Magnite (MGNI - Free Report) operate in adjacent digital advertising spaces and have demonstrated comparable strengths. The Trade Desk, a leader in programmatic advertising, has maintained steady growth with a focus on connected TV and advanced data analytics. Magnite, as a supply-side platform, continues expanding its footprint across multiple device types and formats, emphasizing scale and inventory diversification. The Trade Desk’s strong market position and Magnite’s expanding supply-side reach remain significant competitive factors.
APP’s Revenues and Profitability on the Rise
AppLovin’s third quarter showcased continued strength across its gaming advertising ecosystem and technology platforms. Revenues reached $1.41 billion, rising 68% year over year.
Adjusted EBITDA grew 79% to $1.16 billion, translating to an 82% margin. This reflected exceptional operational efficiency and scalability, with nearly all incremental revenue translating into higher profitability. Free cash flow soared 92% year over year to $1.05 billion, emphasizing the company’s ability to generate substantial cash from its operations, which, in turn, supports consistent capital returns to shareholders. During the quarter, the company repurchased and withheld approximately 1.3 million shares, valued at $571 million, which were funded entirely from free cash flow. Moreover, the board expanded the share repurchase authorization by an additional $3.2 billion, demonstrating confidence in the business’s financial durability and valuation.
Looking ahead, the company expects revenues between $1.57 billion and $1.6 billion in the fourth quarter, indicating 12% to 14% sequential growth. Adjusted EBITDA is projected to be between $1.29 billion and $1.32 billion, with margins expected to be in the 82% to 83% range. The guidance reflects continued optimism around recent model updates, expanding advertiser demand and seasonal strength during the holiday period.
Analyst Projections Signal Continued Growth Ahead
Analyst expectations reflect continued optimism. The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at $2.89 per share, indicating a 67% increase from the year-ago period. Revenue for the same quarter is expected to reach $1.6 billion, indicating 17% year-over-year growth. Looking further ahead, full-year 2025 earnings are projected to increase 106%, with 2026 earnings expected to rise an additional 62%. Revenues are also expected to increase 18% in 2025 and 38.5% in 2026. These projections underscore confidence in the company’s monetization engine and its ability to deliver strong earnings amid digital ad market expansion.
Image Source: Zacks Investment Research
APP Looks Overvalued
AppLovin’s 89% surge over the past six months has pushed its valuation into a highly stretched zone, raising the risk of downside. The stock now carries a forward P/E ratio of 48.47, far above the industry’s 27.14, signaling a steep premium on expected earnings. Even more concerning, its forward P/S ratio of 31.89 towers over the industry’s 2.7, suggesting that revenue expectations may be overly optimistic. When a stock trades at such elevated multiples after a big run-up, any slowdown in growth or softer guidance can trigger sharp valuation compression. As a result, APP’s share price may still fall as the market reassesses these aggressive expectations.
Hold APP for Now
AppLovin’s sharp six-month rally makes the stock look strong on momentum, but a cautious hold stance is more suitable at this stage. The business is expanding effectively into mobile, web and connected TV and its growing AI-driven ad ecosystem continues to strengthen long-term prospects. However, the recent surge has pushed expectations extremely high, increasing the risk of a pullback if growth moderates or the digital ad market becomes more volatile. Until the valuation cools and the market provides a clearer entry point, a wait-and-see approach is sensible. Investors can hold existing positions while avoiding fresh buying for now.
Image: Bigstock
APP Stock Surges 89% in 6 Months: Hold for a Pullback or Buy?
Key Takeaways
AppLovin Corporation (APP - Free Report) has surged 89% over the past six months, outpacing the broader industry’s modest 20% rally.
The key question now is: does AppLovin still present an attractive entry point for investors, or is the stock already running hot? Let’s see
AppLovin Evolving Into a Multi-Channel Advertising Leader
AppLovin’s evolution from a mobile-first ad platform to a diversified advertising powerhouse is accelerating, supported by its expansion into web advertising and connected TV (CTV). A key catalyst behind this shift is the acquisition of Wurl, a streaming-focused content distribution and CTV monetization platform. Wurl enables AppLovin to extend its AI-driven AXON monetization engine beyond mobile apps and into high-growth areas such as smart TVs and streaming environments.
The CTV market continues to see rapid growth as viewers move away from linear television. Wurl’s infrastructure strengthens AppLovin’s ability to deliver targeted, measurable ad campaigns across CTV devices while complementing AXON’s predictive capabilities. Additionally, AppLovin’s growing focus on performance-driven advertising, where measurable outcomes such as conversions take precedence over raw impressions, creates deeper value for advertisers across mobile, web and emerging channels.
As user attention disperses across devices, AppLovin is positioning itself to offer advertisers a more unified platform that spans mobile, web and CTV. This approach diversifies revenue streams and reduces reliance on any single platform, strengthening strategic resilience. If executed effectively, this multi-channel shift could elevate AppLovin into a formidable competitor within the broader omnichannel advertising ecosystem.
Peers like The Trade Desk (TTD - Free Report) and Magnite (MGNI - Free Report) operate in adjacent digital advertising spaces and have demonstrated comparable strengths. The Trade Desk, a leader in programmatic advertising, has maintained steady growth with a focus on connected TV and advanced data analytics. Magnite, as a supply-side platform, continues expanding its footprint across multiple device types and formats, emphasizing scale and inventory diversification. The Trade Desk’s strong market position and Magnite’s expanding supply-side reach remain significant competitive factors.
APP’s Revenues and Profitability on the Rise
AppLovin’s third quarter showcased continued strength across its gaming advertising ecosystem and technology platforms. Revenues reached $1.41 billion, rising 68% year over year.
Adjusted EBITDA grew 79% to $1.16 billion, translating to an 82% margin. This reflected exceptional operational efficiency and scalability, with nearly all incremental revenue translating into higher profitability. Free cash flow soared 92% year over year to $1.05 billion, emphasizing the company’s ability to generate substantial cash from its operations, which, in turn, supports consistent capital returns to shareholders. During the quarter, the company repurchased and withheld approximately 1.3 million shares, valued at $571 million, which were funded entirely from free cash flow. Moreover, the board expanded the share repurchase authorization by an additional $3.2 billion, demonstrating confidence in the business’s financial durability and valuation.
Looking ahead, the company expects revenues between $1.57 billion and $1.6 billion in the fourth quarter, indicating 12% to 14% sequential growth. Adjusted EBITDA is projected to be between $1.29 billion and $1.32 billion, with margins expected to be in the 82% to 83% range. The guidance reflects continued optimism around recent model updates, expanding advertiser demand and seasonal strength during the holiday period.
Analyst Projections Signal Continued Growth Ahead
Analyst expectations reflect continued optimism. The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at $2.89 per share, indicating a 67% increase from the year-ago period. Revenue for the same quarter is expected to reach $1.6 billion, indicating 17% year-over-year growth. Looking further ahead, full-year 2025 earnings are projected to increase 106%, with 2026 earnings expected to rise an additional 62%. Revenues are also expected to increase 18% in 2025 and 38.5% in 2026. These projections underscore confidence in the company’s monetization engine and its ability to deliver strong earnings amid digital ad market expansion.
APP Looks Overvalued
AppLovin’s 89% surge over the past six months has pushed its valuation into a highly stretched zone, raising the risk of downside. The stock now carries a forward P/E ratio of 48.47, far above the industry’s 27.14, signaling a steep premium on expected earnings. Even more concerning, its forward P/S ratio of 31.89 towers over the industry’s 2.7, suggesting that revenue expectations may be overly optimistic. When a stock trades at such elevated multiples after a big run-up, any slowdown in growth or softer guidance can trigger sharp valuation compression. As a result, APP’s share price may still fall as the market reassesses these aggressive expectations.
Hold APP for Now
AppLovin’s sharp six-month rally makes the stock look strong on momentum, but a cautious hold stance is more suitable at this stage. The business is expanding effectively into mobile, web and connected TV and its growing AI-driven ad ecosystem continues to strengthen long-term prospects. However, the recent surge has pushed expectations extremely high, increasing the risk of a pullback if growth moderates or the digital ad market becomes more volatile. Until the valuation cools and the market provides a clearer entry point, a wait-and-see approach is sensible. Investors can hold existing positions while avoiding fresh buying for now.
APP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.