AppLovin (APP) Stock Surges Despite Mixed Results, Analysts Bullish

Shares of AppLovin (NASDAQ: APP) are up more than 11% in premarket trading Thursday despite the company reporting disappointing Q1 results.

APP reported a Q1 loss per share of 31c, compared to a loss per share of 5c in the same period last year. Revenue came in at $625.4 million, up 3.6% YoY and significantly below the consensus estimates of $817.7 million.

Net loss totaled $115.3 million in the period, compared to the $10.5 million loss in the year-ago quarter, while analysts were expecting a profit of $17.7 million.

The company expects full-year total revenue in the range of $3.14 billion to $3.44 billion, down from the previous forecast range of $3.55 billion to $3.85 billion, while analysts were looking for $3.69 billion. APP expects FY adjusted EBITDA midpoint of $1.2 billion, compared to previous guidance of $1 billion.

AppLovin said it adjusted the total revenue and Software Platform revenue guidance by $210 million non-recurring publisher bonuses recorded as contra-revenue.

The company also trimmed its Apps revenue guidance due to its focus on potential margin contribution from the Apps. On the other hand, APP has also raised its adjusted EBITDA target thanks to the strong growth of its Software Platform business and anticipated operating improvements in Apps.

AppLovin’s board approved a share repurchase plan of $750 million "given our current valuation relative to the significant growth opportunities in front of us, we believe we can create shareholder value by opportunistically buying our own shares."

Oppenheimer analyst Martin Yang reiterated an Outperform rating on APP stock but lowered the price target to $74.00 per share from $100.00 to reflect peer multiple compression.

“The company is evolving at extraordinary speed. While we have reservations on how effective APP can stay without 1P games, its recent results clearly showed Software can maintain momentum despite declines in Apps,” Yang said.

Morgan Stanley analyst Matthew Cost maintained an Overweight rating and a $70.00 per share price target after results “showcased the differentiation of APP's ad platform even through seasonal/reopening headwinds.”

Cost said shares moved higher in afterhours as APP ”raised its '22 EBITDA guide by 20% as it plans to focus future growth efforts on the ad network and reduce investment/boost profits from the 1P games.”

By Senad Karaahmetovic

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