1 Stock to Buy Now Before It Climbs 54% Over the Next Year, According to Wall Street Analysts

It's not often that every Wall Street analyst covering a stock thinks it's underpriced. While sell-side analysts are an optimistic bunch, there's usually a handful of analysts who think it's worth selling, or at least have a price target below the current share price. That's not the case with AppLovin (NASDAQ: APP), though. The stock currently trades around $324 per share, but the lowest analyst price target is $325. What's more, the median price target, $500, is a whopping 54% above the current share price.

That kind of optimism is worth diving into to determine why there's such a gap between the market price and analysts' expectations.

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The big differentiating factor driving growth for this adtech

AppLovin differentiates itself from other adtech companies by taking a performance fee when the ads it places drive conversions, such as game downloads, in-app purchases, or, increasingly, e-commerce sales. Most other platforms charge a flat percentage of ad spend. It also operates a supply-side platform for publishers, taking a 5% fee on all the ads it sells.

The company's Axon 2 artificial intelligence model has driven incredible growth for the business. The model optimizes digital ad placements, targeting, and bids to maximize conversions within an advertiser's budget. As conversions have improved, so too has AppLovin's revenue.

The company fell short of earnings expectations last quarter, however, leading to a massive sell-off in the stock. Management pointed to a slower cadence in model improvements for Axon 2, but assured investors the next step-up in model performance landed just after the quarter ended.

Importantly, there's no indication that Axon 2's improvements are diminishing or being replaced by larger, better-capitalized competitors like Meta Platforms or Alphabet. Axon 2 benefits from its broad focus on advertising placements beyond the walled gardens of Facebook/Instagram or Google/YouTube. The result is a more robust system that could deliver better outcomes for many advertisers, since it's not constrained to a single platform.

To that end, AppLovin opened its self-serve platform to all advertisers in June. The company aims to attract what it calls mid-market advertisers and expand beyond the gaming vertical, where it has long focused. Mid-market advertisers balance the need for large advertising budgets with the need for many advertisers to use the platform. Too many advertisers using the same ad-targeting algorithm could render it less effective. Meanwhile, AppLovin can use data generated by a growing number of advertisers on the system to improve the model and scale to more advertisers without adverse effects.

Building a virtuous cycle of improvements in its model that allows more advertisers to use its platform is a careful balancing act. But management has executed well so far, and it's produced excellent revenue and earnings growth as a result.

Can revenue keep climbing?

As mentioned, AppLovin has enjoyed phenomenal revenue growth following the release of its Axon 2 model in 2023. 2024 revenue growth came in at 75%, and it grew another 70% in 2025. Analysts currently expect revenue growth of 48% in 2026, 27% in 2027, and 23% in 2028.

In fact, those estimates may be conservative. CEO Adam Foroughi said he believes the business can compound at roughly 30% annually. AppLovin's share of the digital advertising market remains extremely small. Meanwhile, the market keeps growing bigger every year. Increased market penetration as it expands into advertisers outside gaming, combined with higher overall industry spending, is a recipe for very fast revenue growth.

On top of that, the company should exhibit very good operating leverage as it scales ad spend. While it's spending heavily to improve its AI model, its growing use should result in revenue growth far outpacing operating expense growth. That means AppLovin's earnings growth should move substantially higher over the long run.

So, with the stock trading at 16 times its trailing 12-month sales and an EV-to-EBITDA ratio of less than 20, it looks like a bargain right now. It's no wonder analysts are extremely bullish on AppLovin and expect the shares to climb significantly higher over the next year.

Adam Levy has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.