AppLovin Corporation APP is an artificial intelligence stock that outperformed Nvidia over the last two years, soaring 2,000% compared to NVDA’s 400%. Yet, investors can buy APP stock 50% below its highs and 85% below its average Zacks price target.
AppLovin’s massive selloff was necessary and healthy after the AI-powered digital app monetization company became overheated. APP stock and the broader AI trade may face more near-term selling and volatility.
However, long-term investors should tune out the noise and recognize that selloffs present excellent opportunities to buy strong stocks at steep discounts.
Buying AppLovin down 50% from its peaks is more appealing given its robust AI-driven earnings and revenue growth outlook.
Plus, Wall Street remains bullish on the stock, and APP is finding support near key technical levels while trading at more attractive valuation multiples.
Why This Tech Stock Turned into an AI Superstar on Wall Street
People across the U.S. and the world are glued to their smartphones. AppLovin’s mission is to help app companies vying for their attention grow and succeed.
AppLovin’s diverse product lineup provides essential tools for clients striving to thrive in the increasingly competitive digital app landscape.
Image Source: Zacks Investment Research
AppLovin’s technology helps its clients in mobile gaming and beyond boost user acquisition, enhance engagement, and maximize customer value throughout their lifetimes as users. The company connects clients to “in-app audiences, mobile users, CTV viewers, and more.”
AppLovin nearly doubled its sales (+93%) in 2021. Following that standout year, growth slowed to 1% in 2022 as the digital ad market slumped, dragging down Meta META and others as well.
The nearly $800 billion-a-year digital advertising market has roared back to life in recent years. More importantly, AppLovin’s AI-boosted portfolio has delivered tangible results that clients are willing to pay for, leading to surging revenue and earnings for APP.
Image Source: Zacks Investment Research
APP launched its advanced machine learning and AI-driven AXON technology in the second quarter of 2023. That year, AppLovin grew its revenue by 17% and swung from a loss of -$0.52 per share to a profit of +$0.98. In 2024, it followed up with 43% sales growth and 362%.
AppLovin’s Massive Growth Outlook
AppLovin crushed our Q4 EPS estimate by 29% on February 12. More significantly, APP’s upbeat guidance sent its FY26 earnings outlook soaring.
The company plans to streamline its workforce through AI-based automation even as its business thrives. CEO Adam Foroughi wrote in a letter to shareholders, “I believe in running a lean organization driven by automation and efficiency. Many companies claim to embrace an entrepreneurial mindset, but few aim to reduce headcount even when facing growth opportunities.”
Image Source: Zacks Investment Research
Looking ahead to 2025, APP is focusing on five key growth pillars. One initiative centers on “personalizing ad experiences” with AI to create “countless iterations and dynamically select personalized creatives for each user,” boosting engagement and response rates.
Personalized ads represent the next frontier in the ad industry, shifting from the current “static” experience—where “users see similar-looking advertisements created by humans”—to a more dynamic, tailored approach.
AppLovin is also working to expand its impact across industries, aiming to become a one-stop ad platform for direct-to-consumer businesses, gaming companies, and others in the digital economy.
Underpinning these efforts is a focus on AI-driven automation and personalization. APP is projected to grow its revenue by 20% in both 2025 and 2026, rising from $4.71 billion in FY24 to $6.78 billion in FY26.
Image Source: Zacks Investment Research
The digital app monetization firm is expected to grow its earnings by 52% in 2025 and 37% in 2026, following 362% bottom-line expansion in 2024. This trajectory would lift AppLovin’s EPS from $0.98 per share in FY23 to $9.42 in FY26.
APP’s FY26 earnings estimate jumped 25% since its Q4 release, with its FY25 estimate up 14%, earning it a Zacks Rank #1 (Strong Buy).
Over the past 12 months, APP's 2026 consensus EPS estimate has surged 130%. AppLovin has also beaten our EPS estimates by an average of 24% over the last four quarters.
Time to Buy This Nvidia-Crushing AI Stock on the Dip for 85% Upside?
AppLovin stock skyrocketed 2,000% over the past two years after a steep drop in 2022 alongside the broader market.
APP’s two-year surge outpaces Nvidia’s NVDA 400% and dwarfs digital advertising giant Meta’s META 225%. Since its April 2021 IPO, the stock has climbed 300%, compared to a 30% rise for the Tech sector and a 90% gain for Meta.
These standout returns include AppLovin’s roughly 50% plunge from its mid-February peaks.
Image Source: Zacks Investment Research
AppLovin is trading approximately 87% below its average Zacks price target, and 16 of the 21 brokerage recommendations tracked by Zacks are “Strong Buys.”
AppLovin might test its 200-day moving average, even though it has already fallen from heavily overbought RSI levels to oversold territory. But it found buyers near its November gap up following stellar earnings and Trump election euphoria.
The stock also trades at a 93% discount to its all-time highs and 18% below its median, at 36.9X forward 12-month earnings. AppLovin’s valuation is now closer to the Tech sector’s 1.5 Price/Earnings-to-Growth (PEG) ratio, at 1.8, aligning with its historical median.
Image Source: Zacks Investment Research
Given near-term market uncertainty, investors may be wise to dip their toes into AppLovin and other beaten-down AI stocks rather than diving in headfirst.
That said, AppLovin’s sharp and rapid selloff—alongside other AI names like Palantir, Nvidia, and Constellation Energy—offers investors who missed the last rally a chance to buy APP at a lower price and a more reasonable valuation. If the stock slides further, bullish investors might consider adding to their positions.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
AppLovin Corporation (APP): Free Stock Analysis Report
Meta Platforms, Inc. (META): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
/Palantir%20(PLTR)%20by%20Piotr%20Swat%20via%20Shutterstock.jpg)
