Why AppLovin Stock Popped Today

Key Points

• AppLovin delivered surging growth on the top and bottom lines.

• It completed the sale of its Apps business.

• Analysts are excited about the launch of a new self-serve e-commerce ad tool.

• 10 stocks we like better than AppLovin ›

Shares of AppLovin (NASDAQ: APP) were surging today after the ad-tech company delivered strong second-quarter results, topping estimates on the top and bottom lines.

As of 11:37 a.m. ET on Thursday, the stock was up 14.4% on the news.

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AppLovin stays hot

Revenue in the quarter jumped 77% to $1.26 billion, adjusted for the sale of its mobile-game developer Apps to Tripledot Studios. That beat analyst expectations at $1.22 billion. Revenue per installation rose 70% and installations increased 8%. As previously announced, AppLovin completed the sale of Apps for $400 million and 20% of Tripledot's equity.

On the bottom line, the company continued to deliver incredibly high margins with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) nearly doubling to $1.02 billion, while net income rose 164% to $820 million.

Earnings per share (EPS) rose from $0.89 to $2.39, according to generally accepted accounting principles (GAAP). Backing out the Apps business, it reported $2.26 in EPS.

What's next for AppLovin

Management's guidance was also strong, calling for revenue of $1.32 billion to $1.34 billion, which represents 59% growth at the midpoint on a comparable basis. It also sees adjusted EBITDA of $1.07 billion to $1.09 billion, representing a margin of 81%.

The sale of the Apps business should allow management to focus on only the high-growth advertising business, which continues to deliver incredible results.

AppLovin is also set to launch a new self-serve feature for its e-commerce platform, which could accelerate its growth further. Considering its growth rate, the stock looks well priced at a forward price-to-earnings ratio of 44 after today's jump.

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Jeremy Bowman has positions in AppLovin. The Motley Fool has positions in and recommends AppLovin. The Motley Fool has a disclosure policy.