Jim Cramer Explains Why He Is Avoiding AppLovin Despite the Company's Strong Momentum

AppLovin Corporation (NASDAQ:APP) is one of the stocks Jim Cramer answered questions about. Answering a caller’s query about the stock, Cramer said:

You know, look, AppLovin’s got great momentum, but the fact is it trades at one of the highest price-to-earnings multiples in the entire market. I’m not recommending stocks that have a price-to-[earnings] multiple that is that high. Too much danger, even if I think the company’s great.

AppLovin Corporation (NASDAQ:APP) provides a software platform that helps advertisers and app developers market and monetize their content. The company offers advertising solutions, analytics tools, connected TV services, and mobile games. Cramer discussed the stock in detail during the January 5 episode, as he stated:

The eighth-best stock in the Nasdaq-100 was AppLovin. Now, that’s an advertising software company that helps its customers, like many mobile game developers, grow their reach and monetize their platforms. Now, this is another one with a big retail following. The stock put up huge gains earlier in the year before flattening out over the past few months, but did finish 2025 up 108%. Of course… some people would call these cult stocks. AppLovin’s expensive, trading at 43 times this year’s earnings estimates, which only seems cheap in comparison to Palantir. That said, this company has legitimately great growth and the business is incredibly profitable. Right now, you know what, I can’t name a single competitor to AppLovin. It’s like this company has the whole market to itself. Specifically, AppLovin has seen its revenue roughly triple in the past four years. Meanwhile, the earnings per share have gone from next to nothing to an expected $9.37 for 2025, which would be more than double 2024’s number. The best part, AppLovin’s growth is expected to continue or even accelerate. Wall Street’s looking for 37% revenue growth and 56% earnings growth. And that’s why I’m more comfortable recommending this one because even though AppLovin trades like a speculative stock, the business really isn’t that speculative.

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