Why AppLovin Stock Jumped 46% in May

Shares of AppLovin (NASDAQ: APP), the app-based adtech platform, were soaring last month as the company reported strong first-quarter earnings report, and benefited from a broader recovery in the market and a risk-on mentality as investors downplayed the threat from tariffs and of a slowdown in the economy.

According to data from S&P Global Market Intelligence, the stock finished last month up 46%. As you can see from the chart, the stock gained over several stages during May.

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APP data by YCharts

AppLovin is back in vogue

Like other growth stocks, AppLovin was hit hard by the sell-off earlier in the year, as it fell by more than 50% after popping on a strong fourth-quarter earnings report in February. Due to its high valuation and sensitivity to the macroeconomy as an adtech stock, AppLovin fell sharply on earlier concerns about tariffs and a weakening economy.

Early in May, the stock gained in response to a strong earnings report from Meta Platforms, signaling healthy demand in the digital ad market, and a better-than-expected unemployment rate also lifted AppLovin stock and the broad market.

The following week, AppLovin posted better-than-expected first-quarter results, with advertising revenue up 71% to $1.16 billion, and overall revenue, which includes its mobile apps business that is under contract to be acquired, rose 40% to $1.48 billion, ahead of the consensus at $1.38 billion.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 83% to $1 billion, and generally accepted accounting principles (GAAP) earnings per share jumped from $0.67 to $1.67.

On May 12, the stock jumped again on news that the U.S. and China had reduced tariff rates imposed on each other. Over the rest of the month, the stock crept higher as it received some positive coverage from Wall Street.

Image source: Getty Images.

What's next for AppLovin?

Looking ahead to the second quarter, AppLovin expects $1.195 billion-$1.215 billion in advertising revenue, and it said it expected to complete the sale of its mobile gaming business to Tripledot Studios for $400 million in cash.

The company, which got its start in mobile apps and ads for mobile games, is now making a push into areas like e-commerce and connected TV, giving it ample room for growth.

AppLovin stock is still down by more than 20% from its peak. If the economy remains solid, the stock looks like a good bet to keep gaining.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in AppLovin and Meta Platforms. The Motley Fool has positions in and recommends AppLovin and Meta Platforms. The Motley Fool has a disclosure policy.