AppLovin Corp (NASDAQ:APP) received a price target increase from Wedbush, which reiterated its 'Outperform' rating and lifted its 12-month target to $725 from $620, citing confidence in the company’s ability to sustain rapid growth at high margins.
The stock is up 8% this week at about $580 per share, giving the mobile technology firm a market capitalization of about $198 billion.
Wedbush analysts pointed to several factors driving their outlook, including continued momentum in mobile gaming, expansion into e-commerce, and international growth.
“AppLovin has repeatedly proven that its phenomenal growth will continue for the foreseeable future, and at a staggering profit margin,” the analysts wrote.
According to the firm, mobile game user acquisition spending now totals more than $30 billion annually across advertising platforms, with third-party games accounting for roughly $15 billion, nearly triple from just a few years ago.
The analysts expect this pie to expand further, potentially accelerated by developments from the Apple vs Epic case, which they see as “likely becoming a tailwind for AppLovin next year.”
The report highlighted two near-term catalysts: the company’s earlier-than-expected international rollout later in the third quarter and the launch of its self-serve tool on October 1.
Wedbush also underscored AppLovin’s competitive position in mediation, noting that “AppLovin remains insulated from attempts to take its market share from the MAX platform” due to industry dynamics.
AppLovin’s AXON 2.0 technology was identified as a key driver, with analysts projecting 20% to 30% annual growth as “easily achievable through market growth.”
Wedbush based its new price target on a 37x EV/EBITDA multiple applied to its 2027 estimate, up from 32x previously.
The firm described its forecasts as conservative, suggesting that success in e-commerce and web store migration could fuel growth for at least the next three years.
Wedbush also acknowledged skepticism around AppLovin’s ability to expand internationally and into e-commerce while maintaining EBITDA margins of 80% to 85%.
However, the firm noted that management is focusing on automation rather than sales team expansion, relying on engineering capabilities to scale efficiently.
The analysts also pointed out AppLovin’s role as a “leading market maker,” collecting a 5% fee on competitor-won impressions, which they said turns potential losses into high-margin revenue while improving data diversity and model performance.
While connected TV is seen as AppLovin’s “most exciting upcoming opportunity,” Wedbush believes that market is still one to two years away as the company builds out capabilities and demand.