AppLovin Surges 36% After Record-Breaking Q4 ,Facing Valuation Debate

AppLovin’s stock soared 36% last week after its Q4 and full-year 2024 results exceeded Wall Street’s expectations.

The company reported Q4 adjusted earnings of $1.73 per share, well above the forecast of $1.26. Revenue for the quarter reached $1.37 billion, up 44% year-over-year, surpassing the $1.26 billion expected. For the year, AppLovin’s revenue was $4.7 billion, a 43% increase.

Looking ahead, AppLovin expects Q1 2025 revenue between $1.355 billion and $1.385 billion, higher than the consensus estimate of $1.32 billion. Over $1 billion of this will come from its advertising division, reflecting strong investment in AI.

Following the earnings report, AppLovin’s stock reached a new high, up over 750% in the last year, with a price-to-earnings ratio of 64.1, 115% above its five-year average. This has sparked discussions about its high valuation.

Some analysts, like KM Capital from Seeking Alpha, argue the stock is overvalued by 31% and point to weaknesses in its balance sheet, giving a "sell" recommendation. Meanwhile, Juxtaposed Ideas advises "hold," citing concerns over the company meeting future expectations.

Deep Value Investing, however, upgraded AppLovin to "strong buy," anticipating growth from a new self-service platform expected in 2025. They believe any short-term pullback will be noise.

AppLovin, one of 2023’s top-performing tech stocks, now has a market cap of $173.4 billion. Its success is driven by its AI-powered advertising system and the launch of AXON 2.0, a tool that helps target ads within its gaming apps.

Bridgewater Associates also added AppLovin to its top five buys in its Q4 13F filing, boosting confidence in the stock.