AppLovin Corporation (APP): A Bull Case Theory

We came across a bullish thesis on AppLovin Corporation on Elliot’s Musings’ Substack by Elliot. In this article, we will summarize the bull’s thesis on APP. AppLovin Corporation's share was trading at $324.70 as of June 20^th. APP’s trailing and forward P/E were 58.72 and 54.35 respectively according to Yahoo Finance.

AppLovin (APP) has staged a historic rally since bottoming at just over $9 in December 2022, closing recently at $290—a more than 30x return. The initial bullish thesis in mid-2023 centered on the company’s pivot from legacy app operations to a high-margin software business, underpinned by the rollout of its AXON 2 advertising platform. AXON’s efficiency, self-learning capabilities, and fixed-cost model enabled massive EBITDA margin expansion, with incremental margins reaching 85% and platform-adjusted EBITDA margins hitting 78% as of 3Q24.

Initially dominant in mobile gaming, APP diversified AXON into e-commerce and web advertising by 2024, surpassing expectations and setting the stage for broader adoption. This shift transformed the company’s financial profile, with Software Platform revenue surging 66% year-over-year to comprise 70% of total sales, while overall 2024 revenue and EBITDA estimates leapt from $3.1B and $1.3B to $4.6B and $2.6B, respectively.

These drastic upward revisions, paired with a tripling of valuation multiples, fueled the stock’s explosive gains. The author, despite earning a 340% return, exited too early by underestimating the durability of APP’s margins and conservatively modeling its valuation. A mix of anchoring to consensus, underweighting anecdotal evidence of AXON’s dominance, and psychological pressure to lock in gains led to a premature exit.

Today, APP trades at ~25x 2026 EBITDA, which appears reasonable given its 70 %+ EBITDA margin, 40 %+ FCF margin, and strong growth. While the author questions the long-term defensibility of APP’s moat, the company’s transformation offers a rare case study in how underappreciated margin expansion and sentiment shifts can drive exceptional stock performance.

Previously, we covered a bullish thesis on AppLovin Corporation by Jimmy Investor in March 2025, which highlighted the company’s AI-driven AXON platform and shift to high-margin software. The company’s stock price has appreciated by approximately 26% since our coverage. This is because the thesis played out. Elliot shares a similar view but emphasizes margin mis-modeling and investor sentiment shift.

AppLovin Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 96 hedge fund portfolios held APP at the end of the first quarter, which was 95 in the previous quarter. While we acknowledge the risk and potential of APP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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