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Applovin Stock Roars As Analyst Sees An Edge From Ai In Struggling Mobile-Ad Market

May 18, 2023
minute read

AppLovin Corp. witnessed another rally in its shares on Wednesday, following an upgrade by a Wall Street analyst who highlighted the company's advancements in artificial intelligence (AI) as a competitive advantage in the app-monetization industry.

AppLovin's shares, trading under the symbol APP, surged over 9% to reach an intraday high of $25.01. The stock has more than doubled in value in 2023, experiencing a remarkable year-to-date increase of over 133%, after a challenging 2022. In the six sessions since the company's earnings report last week, AppLovin shares have soared nearly 42%, marking its second-best performance over a six-session period, surpassed only by a 44.5% surge in May of the previous year, according to Dow Jones Market Data.

While AppLovin surpassed lowered expectations in its recent earnings report, some analysts cautioned that a significant rebound in the mobile advertising market was not anticipated until 2024. However, BofA Securities analyst Omar Dessouky expressed a different view on Wednesday, suggesting that AppLovin's AI initiatives and machine learning capabilities could position the company ahead of that timeline.

Dessouky noted that AppLovin's year-over-year revenue per install had risen by 48%, while similar metrics for its peers indicated a decline. He attributed this performance to the company's "machine learning edge in locating high lifetime value users for app advertisers" and its ability to secure market share among higher-paying advertisers. Dessouky expects the positive pricing momentum to continue throughout the fiscal year.

AppLovin had previously announced plans to enhance its proprietary Axon machine-learning recommendation engine with AI advancements, a move that CEO Adam Foroughi emphasized during an analyst briefing in February. The staged rollout of AppLovin's Axon 2.0 engine is anticipated to accelerate revenue growth in 2023 and contribute to a series of successful financial results throughout the year.

Shares of rival company Unity Software Inc., trading under the symbol U, also experienced a rally, surging up to 6% to reach an intraday high of $29.94 on Wednesday. Unity Software's shares have increased by 4% year-to-date. By comparison, the broader market indices have seen more moderate gains, with the S&P 500 index up 8% for the year and the tech-heavy Nasdaq Composite Index up 19% year-to-date.

According to FactSet data, among the 23 analysts covering AppLovin, 13 have buy ratings, nine have hold ratings, and one has a sell rating, with an average target price of $24.38, up from the previous $23.09. 

As for Unity Software, of the 24 analysts covering the stock, 11 have buy ratings, 10 have hold ratings, and three have sell ratings, with an average price target of $37.

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