AppLovin (APP) Shares Drop After Earnings Miss, Analyst Sees Growing Risks

August 11, 2022 6:47 AM EDT
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Price: $21.37 +4.86%

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Shares of AppLovin (NASDAQ: APP) are down almost 7% in premarket trading Thursday after the Q2 results showed the company continues to grapple with weak consumer and advertising spending.

The mobile technology company reported a Q2 loss per share of 6c, much worse than the analyst estimate of $0.15. Revenue came in at $776.2 million, missing the consensus estimates of $830.7 million.

Looking ahead, AppLovin expects full-year revenue from $2.84 billion to $3.14 billion, again lower than the consensus of 3.29 billion. Full-year software platform revenue is expected to be between $1.14 billion and $1.29 billion and FY apps revenue between $1.70 billion and $1.85 billion. APP reiterated its FY adjusted Ebitda midpoint forecast of $1.2 billion.

“The mobile app industry is facing several headwinds. While overall consumption of mobile gaming apps remains stable, consumer spending is down compared to last year,” the company said in a shareholder letter.

“Increasing macroeconomic uncertainty over the past quarter compounded these headwinds, resulting in further softening of the mobile gaming market.”

BofA analyst Omar Dessouky sees growing risks, but also an attractive valuation.

“Downside risk on the stock has increased slightly vs. our prior view due to macroeconomic factors,” he told clients in a note.

BTIG analyst Clark Lampen cut the price target to $53 from $60 to reflect tempered software outlook.

“Despite fundamental bumps and potential deal-related hiccups, APP remains a highly profitable, rapidly scaling mobile in-app operation focused on driving bigger lifts in accuracy/budget. Following Tuesday's NBO, it would not surprise us if other strategic options emerge for APP,” Lampen wrote in a client note.

By Senad Karaahmetovic

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