Do You Believe in AppLovin Corp.’s (APP) Attractive Growth Potential?

Parnassus Investments, an investment management company, released the “Parnassus Mid Cap Growth Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The Russell Midcap Growth Index fell 7.12% in the first quarter, starting with a continuation of the late 2024 rally but later experiencing a sharp decline. The Fund (Investor Shares) fell -9.98% (net of fees) in the quarter, compared to the Russell Midcap Growth Index’s -7.12% fall. Stock selection in Consumer Discretionary and Industrials contributed to the relative performance, while Communication Services and Health Care detracted. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Parnassus Mid Cap Growth Fund highlighted stocks such as AppLovin Corporation (NASDAQ:APP). AppLovin Corporation (NASDAQ:APP) develops a software-based platform for advertisers to enhance the marketing and monetization of their content. The one-month return of AppLovin Corporation (NASDAQ:APP) was -17.51%, and its shares gained 292.87% of their value over the last 52 weeks. On July 3, 2025, the stock of AppLovin Corporation (NASDAQ:APP) closed at $341.64 per share, with a market capitalization of $115.61 billion.

Parnassus Mid Cap Growth Fund stated the following regarding AppLovin Corporation (NASDAQ:APP) in its Q1 2025 investor letter:

We initiated positions in several disruptive, highly innovative companies whose valuations fell sharply during the sell-off. AppLovin Corporation’s (NASDAQ:APP) machine-learning engine optimizes mobile ad delivery and improves with scale, creating a winner-take most dynamic.

AppLovin provides an ad platform for mobile games. The platform includes an AI-driven tool that becomes more effective at ad targeting as it ingests more data, creating a winner-takes-all dynamic that should fuel future growth. After a strong run, AppLovin’s stock sold off sharply during the recent momentum unwind, allowing us to purchase the stock at an attractive price relative to its potential growth.

AppLovin Corp.(APP) Drops 10.9% W/W on Misrepresentation Claims

A close-up of a mobile device, showing an advertiser reaching out to a consumer via a software-based platform.

AppLovin Corporation (NASDAQ:APP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 96 hedge fund portfolios held AppLovin Corporation (NASDAQ:APP) at the end of the first quarter, which was 95 in the previous quarter. AppLovin Corporation’s (NASDAQ:APP) Q1 2025 revenue surged 40% to $1.5 billion. While we acknowledge the potential of AppLovin Corporation (NASDAQ:APP) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered AppLovin Corporation (NASDAQ:APP) and shared the list of stocks Jim Cramer recently shared insights on. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of APP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.