We came across a long thesis on Applovin Corp (NASDAQ:APP) on ValueInvestorsClub by yxd0950. In this article we will summarize the bulls’ thesis on APP. The company’s shares were trading at $84.57 when this thesis was published, vs. closing price of $350.65 on Jan 3rd.
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AppLovin Corp (NASDAQ:APP) is a technology company dedicated to enhancing the mobile app ecosystem by supporting the growth and success of app developers. Its software platform offers AI-powered tools and end-to-end solutions designed to automate and optimize marketing and monetization efforts, enabling developers to expand their global reach and revenue streams. Additionally, the company manages a portfolio of its own mobile applications, including a globally diversified portfolio of over 200 free-to-play mobile games.
The author believes that the opportunity of investing in APP has its roots in Apple’s change in App Tracking Transparency policy – this created a massive shift in game advertising, from an approach primarily based on targeting high-spending players, into a more diversified approach of advertising across the entire community of players. This change opened up a strong opportunity for APP, as the increase in ad supply and the need for affordable alternatives to social media ads have created high demand. APP delivers in-game ads, such as those appearing between levels, which effectively target interested players interested in exploring new games. Another important aspect of the company’s strengthening competitive advantage lies with the company’s AI engine – APP developed its new proprietary matching engine based on the latest AI technology that maximizes the chance of app installs; this new product has exploded in terms of growth, significantly outpacing its closest peer, and the author believes it will be a long time until it could be challenged by competitors in terms of capability.
Given the superior competitive position and technology of AppLovin Corp (NASDAQ:APP), the author argues that the company will continue to improve the monetization of its user base and significantly decrease the share count, which could lead to 20%+ FCF growth for a long period of time. Assuming 3-4% FCF yield, the author sees 50-100% potential upside from the market price at the time of the writeup. It should be mentioned that this bull thesis largely materialized, as the current market price stands at ~$350 per share, significantly exceeding the initial estimated upside.
While we acknowledge the potential of APP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than APP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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