AppLovin stock price rose for two consecutive weeks, reaching its highest level since March 24 as investors bought the dip. This recovery will either accelerate this week or reverse when the company publishes its financial results. APP stock was trading at $307 on Monday, up by 52% above the lowest level in April.
AppLovin earnings ahead
The main catalyst for the AppLovin stock price is its upcoming earnings, which will provide more information about its business.
These earnings will especially be notable because of its performance in the past year, when it became one of the top performers in Wall Street. At its highest level this year, it was up by almost 6,000% from its lowest level in 2023.
This surge helped to transition a mid-cap technology company worth less than $2 billion into a juggernaut worth $230 billion.
The results will also be notable as AppLovin’s market cap has dropped to about $112 billion today. This decline happened as investors sold off companies pitching their artificial intelligence credentials and after a short-seller warned that the company was exaggerating its sales.
Therefore, the upcoming results will provide more information about how the company performed in the first quarter.
Wall Street analysts anticipate the results to show that the company’s sales rose by 30% YoY in Q1 to $1.38 billion. The highest estimate is for its revenue to come in at $1.43 billion, while the lowest forecast will be at $1.27 billion.
We believe the company’s revenue will be either $1.39 billion or $1.40 billion since the firm has a long history of beating analysts’ estimates.
The average estimate is that its earnings per share (EPS) will be $1.96, higher than the 92 cents it made last year.
Analysts see AppLovin’s annual revenue and earnings to be $5.62 billion and $7.6 billion, respectively.
Read more: AppLovin stock price crashes as we predicted: what next for APP?
Valuation concerns remain
The biggest concern about AppLovin stock is that its valuation is still stretched even after the stock plunged.
It still has a market cap of over $112 billion, making it one of the top players in the advertising industry. AppLovin’s revenue is expected to reach $8.42 billion in 2030.
It has a net income margin of 33%, meaning that the company’s annual profit will be about $2.7 billion or $3 billion at most. That means that AppLovin trades at a forward 2030 earnings per share (EPS) metric of about 38, which is a bit pricey.
Still, analysts are largely optimistic that the AppLovin stock price has more room to grow. The average estimate is that its stock will jump from the current $307 to $432, a 40% jump from the current level. Some of the top optimistic analysts are from companies like JPMorgan, Needham, Goldman Sachs, and Morgan Stanley.
AppLovin stock price analysis
The daily chart shows that the APP share price bottomed at $200 in April and has then bounced back to the current $307. It has moved above the 50-day and 100-day Exponential Moving Average (EMA).
The stock has also formed an inverse head and shoulders pattern, a popular continuation sign in the market. Also, the two lines of the MACD have pointed upwards and are nearing their zero line. It has formed a bullish divergence pattern.
Similarly, the Relative Strength Index (RSI) has also formed a bullish divergence and moved above 50. Therefore, the stock will likely have a bullish breakout as bulls target the psychological point at $400. A drop below the psychological point at $200 will invalidate the bullish AppLovin share price forecast.
The post AppLovin stock price analysis: chart points to a surge after earnings appeared first on Invezz
