Bull of the Day: AppLovin (APP)

AppLovin (APP), a leading ad-tech platform powering mobile app monetization and user acquisition, has emerged as one of the most explosive growth stories in the tech sector over the past few years. Fueled by surging demand for performance-based advertising and advanced machine learning capabilities, the company has carved out a highly profitable position in a rapidly growing industry.

The stock has delivered a staggering return of over 1,300% in just two years, rewarding early believers with outsized gains. And notably, the Zacks Rank was ahead of the curve, as APP held a top Zacks Rank for much of that historic run, flagging strong earnings momentum well before the broader market caught on.

Following such a meteoric rise, shares have traded sideways over the past eight months as the valuation cooled and profit-taking set in. But now, with the stock consolidating and fundamentals continuing to strengthen, the setup is once again turning bullish. Earnings growth remains robust, and analysts have issued substantial upward revisions to estimates, indicating strong turn higher in sentiment. With momentum building, AppLovin looks ready for its next leg higher.

Can Earnings Upgrades Propel AppLovin Stock Higher Again?

Over the past two months, AppLovin has received some of the most significant upward revisions that I have seen in a tech stock. Analysts have raised their forecasts by nearly 30% across timeframes, an unusually sharp and unanimous upgrade that has propelled APP to a Zacks Rank #1 (Strong Buy).

What makes these upgrades even more compelling is AppLovin’s impressive track record of outperforming expectations. The company has surpassed earnings estimates in each of the last four quarters, with an average surprise of 23%. That history suggests that even after these aggressive revisions, current estimates may still be conservative.

Looking ahead, earnings are projected to grow by a remarkable 88.5% in 2025, followed by another strong year of 41.1% growth in 2026. Revenue is also expected to expand at an accelerating pace, rising 16.6% this year and 20.4% next year. With both top- and bottom-line momentum and continued bullish analyst sentiment, AppLovin’s next leg higher may already be taking shape.

AppLovin Stock Breaks Out from Technical Pattern

After experiencing a sharp correction between February and April, AppLovin stock has been quietly forming a classic cup and handle pattern, a bullish technical formation that often precedes significant upward moves. This pattern typically reflects a period of consolidation and accumulation following a strong prior uptrend.

On Tuesday, the stock appeared to break out decisively above the handle’s upper resistance level, signaling a potential resumption of its broader uptrend. This breakout is another encouraging sign that investor conviction is returning.

As long as APP holds above this key breakout level, the technical setup suggests increasing momentum and the potential for continued buying pressure. If the pattern plays out in full, the measured move could imply substantial upside from current levels, reinforcing the bullish case already supported by earnings strength and analyst upgrades.

AppLovin Shares Trade at a Premium Valuation

AppLovin is not a cheap stock by any stretch. The shares currently trade at 40.6x forward earnings, which is above the industry average, but notably still below the company’s three-year median valuation of 49.3x. This elevated multiple reflects the market’s recognition of AppLovin’s robust earnings growth, strong cash flow, and dominant position within the ad-tech ecosystem.

While the valuation may give pause to traditional value investors, it remains within a reasonable range for high-growth, high-momentum tech names. For active traders and investors who focus on growth and momentum strategies, AppLovin’s premium multiple may be justified by its consistent earnings beats, accelerating revenue growth, and recent bullish breakout on the charts. In this context, the stock’s valuation, though rich, is not absurd, especially if the company continues to deliver on its aggressive growth trajectory.

Should Investors Buy Shares in APP?

With strong earnings momentum, bullish estimate revisions, and a breakout from a bullish technical pattern, AppLovin is showing all the right signals for a potential move higher. While the stock trades at a premium, its growth outlook and execution may justify the valuation. For investors focused on momentum and growth, AppLovin looks like a timely opportunity to ride the next leg of its rally.

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This article originally published on Zacks Investment Research (zacks.com).

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