Shares of app publishing and monetization company AppLovin (APP 10.50%) popped on Friday. A competitor published its latest quarterly earnings and that, in part, may have investors feeling good about AppLovin. Additionally, an analyst raised AppLovin’s price target, which also helped boost confidence. As of 3:20 p.m. ET, AppLovin stock was up 10.5%.
Why are investors so happy?
DA Davidson analyst Franco Granda raised his price target for AppLovin stock today, according to StreetInsider. The new price target — the price Granda believes it can hit within the next year — is $55 per share, up 17% from his previous price target of $47 per share. This represents significant 25% upside from where AppLovin trades now, as of this writing.
Perhaps AppLovin’s biggest competitor is Unity. And AppLovin’s financial results for the third quarter of 2023 (reported on Nov. 8) were better than Unity’s (reported yesterday afternoon) across the board.
On the top line, AppLovin grew revenue by 21% year over year to $864 million. On the bottom line, it had net income of $109 million. By comparison, Unity’s pro forma revenue (adjusted for a major acquisition) was only up 8% to $544 million. And it had a $125 million net loss.
This outperformance compared to its key rival certainly has investors upbeat about AppLovin.
Things are looking up for AppLovin
AppLovin’s software helps apps get discovered and monetized. Its artificial intelligence (AI) software Axon 2.0 launched in the second quarter and is credited with the company’s strong, profitable growth in Q3. But the good times may soon get even better.
In the upcoming fourth quarter, AppLovin’s management expects to generate revenue of $910 million to $930 million. At the midpoint of this guidance, the company would grow its top line by 31% year over year — its best growth in about two years.
In summary, AppLovin’s recent results were strong, and it looks to be strengthening. The company’s relative outperformance compared to Unity was a timely reminder to the market today.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Unity Software. The Motley Fool has a disclosure policy.