Applovin (NASDAQ: APP) Up 8% Today: Here’s Why

Shares of $127.6 billion Applovin (NASDAQ: APP) are up more than 8% or $28.63 on the day.

Momentum stocks like Applovin are mostly surging higher and short positions are covered and investors FOMO kicking in and not wanted to miss on the rally.

Momentum is all thanks to strong first quarter results and a broad tech sector rebound on the heels of cooling trade war tensions.

AppLovin just posted first-quarter revenue of $1.48 billion (up 40% year over year), which beat estimates of $1.38 billion. Adjusted EPS came in at $1.67, above the $1.45 consensus. The advertising segment led growth, with 71% year-over-year revenue growth with an 81% margin.

Free cash flow for the quarter stood at $826 million, marking a 19% growth quarter-over-quarter. EPS of $1.67 beat estimates by 23 cents.

Guidance was just as impressive.

CFO Stumpf says second-quarter advertising revenue will range from $1.195 million to $1.215 million. Adjusted EBITDA will range from $970 million to $990 million.

APP is also targeting an adjusted EBITDA margin of about 81%.

Analysts are Still Bullish 

Analysts at Jefferies reiterated a buy rating on the APP stock with a price target of $530.

“Despite highly impressive 71% y/y ad rev [revenue] growth, we believe the fastest growth still lies ahead,” said analysts led by Brent Thill, as quoted by Seeking Alpha.

Morgan Stanley reiterated an overweight rating with a $420 price target.

“APP delivered a strong beat as the core gaming ads outperformed and non-gaming continued to build momentum with an estimated ~$150mn contribution to 1Q,” said the firm.

Wells Fargo also reiterated an overweight rating with a price target of $405. “Much better-than-expected 1Q results/2Q guide vs. a backdrop of investor trepidation created by multiple short reports,” added the firm, as also quoted by Seeking Alpha.

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