Veteran analyst drops jaw-dropping price target on AppLovin stock | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

It’s safe to say that when most folks think of AI stocks, they typically picture shiny Nvidia or AMD GPUs.

This is for good reason, as those GPUs are the rockstars powering the most complex chatbots like ChatGPT, Gemini, Claude, and Grok.

But in doing that, investors tend to ignore a whole software side that continues flying under the radar.

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One such unsung hero is AppLovin (APP) , a scrappy ad-tech player turning AI into a money machine for mobile ads.

The AI software stock turned heads on Wall Street with a rip-roaring 300% gain in 2024, but things have been mostly muted so far this year.

Nevertheless, a fresh analyst note says the tide could flip fast, giving this stock the juice it needs to rocket higher again.

AppLovin stock is drawing fresh attention after a bold new analyst call.

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AppLovin’s secret AI engine keeps advertisers hooked

AppLovin’s is an AI-powered ad-tech giant that’s stunned everyone with its eye-catching operational performance of late.

It began in Palo Alto over a decade ago when Adam Foroughi, John Krystynak, and Andrew Karam joined forces to help mobile app developers boost user revenue.

The platform started as a simple recommendation tool but swiftly evolved into a full-on in-app advertising machine.

Following a string of funding rounds, it went public in 2021 at a whopping valuation of nearly $24 billion.

In recent years, AppLovin has doubled down on layering AI into its powerful ad tech engine. Its AI-powered MAX mediation and AXON targeting engines fine-tune ad placements in real-time, tracking user behavior to boost returns.

With a reach that spans north of a billion daily gaming sessions, AppLovin’s data advantage is tough to beat.

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Moreover, with a lean software model and publishing arm, it’s locked in a moat that’s almost impossible to cross.

Scotiabank’s bold bet fuels AppLovin stock buzz

AppLovin just picked up a fresh vote of confidence from Scotiabank, which assigned a Sector Outperform rating on the stock with a $430 price target.

That implies a superb 25% upside from here, and the analyst behind the call, Nat Schindler, didn’t mince words.

Schindler feels AppLovin has “blown through the Rule of 40,” which is typically considered the gold standard for software investors.

That means it efficiently blends sales growth while its profit margin easily clears the 40% bar that healthy SaaS firms aim for.

However, as its recent quarterlies suggest, AppLovin isn’t just clearing it, it’s lapping the field.

In the first quarter, the company posted a 40% year-over-year jump in sales growth and an eye-catching 68% adjusted EBITDA margin. That equates to a triple-digit “Rule of 40” number, a massive accomplishment in performance advertising.

Free cash flow was perhaps even more impressive, topping $826 million, which AppLovin’s management used to fund a $1.2 billion buyback and the exit from its old mobile games unit.

Though Scotiabank concedes the stock doesn’t look cheap on sales multiples, with such margins, there’s plenty of room for earnings to continue climbing.

Scotiabank’s bullish stance joins a chorus of other big analysts warming up to AppLovin.

Morgan Stanley just raised its target to $460 and keeps an Overweight call. Similarly, Goldman Sachs nudged its price target to $435, noting AppLovin’s ad platform is hitting a new stride.

It’s important to note that AppLovin stock skyrocketed close to 300% last year and over 816% in the past three years.

Year-to-date, though, we’ve seen sluggishness, with the stock cooling off, delivering just a meager 6.5% gain compared to the broader market gain of around 6%.

The past month, in particular, has been rough, where the stock has lost almost 18% value, which creates an attractive entry point.