AppLovin (APP): 3 Reasons We Love This Stock

Over the past six months, AppLovin’s shares (currently trading at $515.00) have posted a disappointing 9.2% loss, well below the S&P 500’s 3.1% gain. This may have investors wondering how to approach the situation.

Following the drawdown, is now a good time to buy APP? Find out in our full research report, it’s free.

Why Are We Positive On AppLovin?

Sitting at the crossroads of the mobile advertising ecosystem with over 200 free-to-play games in its portfolio, AppLovin (NASDAQ:APP) provides software solutions that help mobile app developers market, monetize, and grow their apps through AI-powered advertising and analytics tools.

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, AppLovin grew its sales at an impressive 30.4% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers.

2. Customer Acquisition Costs Are Recovered in Record Time

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

AppLovin is extremely efficient at acquiring new customers, and its CAC payback period checked in at 1.3 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give AppLovin more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

AppLovin has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the software sector, averaging an eye-popping 72.5% over the last year.

Final Judgment

These are just a few reasons why we think AppLovin is one of the best software companies out there. After the recent drawdown, the stock trades at 21.3× forward price-to-sales (or $515.00 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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