AppLovin Corp (NASDAQ:APP) has earned a repeat Buy rating from analysts at Bank of America who believe investors will “soon connect the dots” on the mobile technology company’s long-term growth story.
The bullish recommendation comes after a meeting between the analysts at AppLovin’s CEO in New York City. AppLovin's ability to articulate its strategic vision has been improving, particularly in explaining its competitive edge and market potential, the analysts believe.
They see the company’s Axon Pixel technology as a key driver of future growth.
“We believe AppLovin has the opportunity to establish a large Axon Pixel footprint across 10s of millions of eCommerce websites, enabling it to attribute on the order of (potentially) $100 billion of consumer spend to ads shown in mobile games,” they wrote.
Significant investments
AppLovin is well-positioned to demonstrate to eCommerce merchants that mobile games can be a powerful advertising channel, encouraging them to adopt Axon Pixel and increase spending on Audience+. To date, these merchants have largely relied on major social media platforms like Facebook.
Analysts wrote that AppLovin's advantage lies in its significant investment, estimated at around $10 billion, in building proprietary data to train predictive models that drive eCommerce returns within mobile games.
By consistently winning ad auctions, the company gathers insights on gamer behavior and spending patterns, refining its predictive models. This feedback loop strengthens its ability to outbid competitors like Google and Meta while maintaining profitability.
“Only Big Tech have the financial resources to take such market entry risk, yet the incentive is poor because the opportunity cost of innovating on their own platforms is very high,” analysts wrote.
“The need to take principal risk on impressions at auction means that, without superior AI, outbidding AppLovin would likely lead to few conversions, and large losses.”
Despite recent market volatility and short-seller reports, the bank's analysts see this period as an opportunity for investors to acquire a high-growth company at a discount relative to major AI and digital advertising peers.
They awarded the stock a $580 price target. Shares of AppLovin traded 5.9% higher at about $273 on Wednesday afternoon.