AppLovin: Citi hikes PT by 37% on ad growth potential, eCommerce expansion

Citi has significantly increased its price target for Applovin Corp (NASDAQ:APP ), citing promising growth prospects in the eCommerce space.

The investment bank raised its target to $460 from $335, reflecting a 37% increase, while reiterating a "Buy" rating for the marketing software firm.

Citi’s bullish outlook follows its meeting with AppLovin's leadership, where the company highlighted its strategic advancements in ad technology and its initial success in eCommerce advertising, which is still in beta. Management expressed optimism about boosting ad conversion rates from the current 1% to 5%, approaching social media platforms' benchmarks, the brokerage said in a note.

"We came away from the meeting incrementally more bullish on the firm’s growth prospects both in mobile gaming and eCommerce," analysts said.

Additionally, AppLovin’s ability to monetize eCommerce ads without competitive risks could attract new advertisers beyond its traditional mobile gaming clients, said Citi analysts.

"Given this backdrop of potential growth vectors, we are modestly raising our software revenue estimates and now fall toward the high end of the company’s targeted range of 20% to 30% annual Ad revenue growth," analysts wrote.

Despite labeling the stock as high risk due to industry volatility and execution challenges, Citi emphasized AppLovin’s robust financial profile, diverse game portfolio, and leading tech stack as mitigating factors.

As AppLovin continues to evolve from a mobile gaming-focused platform to a broader digital advertising powerhouse, its exploration into eCommerce could be a game-changer, offering significant growth opportunities in the years ahead, according to Citi.

Source: Investing.com