AppLovin: Nascent Advertising Opportunities Trigger Rich Growth Prospects - Wait For Dips
Summary
- APP's pivot to e-commerce and web advertising segments has driven their renewed growth opportunities indeed, as observed in the accelerating top-line growth & richer profit margins.
- If anything, we expect the management to continue delivering high double digits growth ahead, as they launch the self-service advertising platform from Q2'25 onwards.
- On the other hand, despite the richer Free Cash Flow generation, APP has reported a rapidly deteriorating balance sheet attributed to the overly aggressive share retirement cadence.
- This is worsened by the stock's seemingly overbought position, the uncertain macroeconomic environment, and the overly fast/ furious stock price recovery from the April 2025 bottom.
- Therefore, while we may upgrade the APP stock to a Buy, it is with the caveat that investors only do so upon a moderate retracement.
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