Deutsche Bank starts coverage on AppLovin with Buy, Unity at Hold

Investing.com -- Deutsche Bank began coverage of AppLovin with Buy and a Hold on Unity Technologies, saying AppLovin dominates mobile game advertising and has room to expand beyond gaming.

The bank set a $705 price target on AppLovin, calling it the leading player in mobile game user acquisition with about 80% share on the supply side and over 55% on the demand side.

Analyst Ben Black said AppLovin’s ad technology improves with scale, reinforcing its market position.

Deutsche Bank said AppLovin’s AI-powered Axon model performs well across the open web and is now expanding into e-commerce advertising, a market much larger than mobile gaming.

Even limited penetration of e-commerce ad spend could help AppLovin outpace Street expectations, the note said.

The bank expects e-commerce traction to improve ad conversion rates and attract more advertisers, broadening AppLovin’s revenue mix.

On Unity, Deutsche Bank set a $39 price target and said recent management changes and stronger infrastructure could stabilize growth.

However Unity is unlikely to outperform consensus estimates through 2027 despite expected 7% annual revenue growth.

The bank said Unity’s new engine, Unity 6, is gaining adoption, but its financial impact will be limited as the company takes a cautious pricing approach after last year’s backlash over runtime fees.

Deutsche Bank added that while Unity’s access to runtime data could enhance its ad network, AppLovin’s lead in AI algorithms and expansion into e-commerce give it a stronger competitive edge.

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