Fundamental analysis
AppLovin is a company that focuses on mobile applications. It first develops them in-house on a custom basis and then provides complete marketing and monetization of third-party mobile apps through its MAX, AppDiscovery, and SparkLabs marketing platforms. In 2020, the company acquired Czech mobile game developer GEEWA.
APP went public in 2021. The IPO price was approximately $70 with a high of $98 per share.
US application software is a sector that is currently doing very well compared to other segments of the US market. However, within the IT sector, application software revenue is mediocre with an expected growth of 17% per year (IT is growing at 26% per year).
The company’s turnover has grown regularly every year, including covid years. Profit in 2022 was -$192 million. This year’s forecasts point to a profit of approximately USD 20 million. The loss in 2022 is due to acquisitions of other companies.
The company does not pay dividends.
The major shareholders are the Kohlberg Kravis Robert funds (owns 10%) and the Vanguard Group (owns 6%).
Results
The company launched AXON 2.0 in the second quarter of 2023. It is a marketing engine that uses machine learning (AI). As a result, the company saw a 14% increase in revenue and a 25% increase in EBITDA to $273 million. The software platforms division, under which AXON 2.0 falls, is the company’s fastest-growing segment. Over the past two years, revenue has increased threefold.
The company’s total revenue reached USD 750 million and net profit reached USD 80 million.
In the application sales segment, the company saw a 25% year-over-year decline in revenue.
Technical analysis
Since the beginning of the year, the stock is up 290%. This is of course due to the low base.
The moving averages correlate with the economic outlook, they have been in an uptrend since June. However, the RSI index has been overbought for several weeks in a row.
Conclusion
The company has a strong financial background and when it is not buying other companies, it is making reasonable profits. Turnover is increasing and profits are also increasing. AppLovin is clearly celebrating success with its marketing activities for third-party applications and is only strengthening its position with the new AXON 2.0 release. The segment itself is growing. The question is whether the growth of almost 300% in the last 8 months does not already reflect all these successes.
The RSI index has been in an overbought range for some time. That alone may not overcome positive fundamentals (APP’s economic outlook), but once the fundamentals change just a bit, the RSI can take the initiative and help the stock to the downside.