Why AppLovin Stock Gained 12% in April
Key Points
AppLovin got a pair of positive analyst notes last month.
The stock is still sensitive to broader fears about AI disruption on software.
The stock looks well-priced considering its growth rate.
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Shares of AppLovin (NASDAQ: APP) were moving higher last month as the adtech company bucked some of the headwinds in the software sector.
It was a roller coaster month for the stock, with shares trading up nearly 25% at one point, and AppLovin finished April up 12%, according to S&P Global Market Intelligence. As you can see from the chart below, a few strong days in the middle of the month were responsible for the stock's gains.
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APP data by YCharts
What happened with AppLovin last month
Like the rest of the software sector, AppLovin slipped on April 8 as Anthropic announced its new Mythos AI model, which was reportedly too powerful to be released to the general public and could be a cybersecurity threat.
AppLovin bounced back with the help of some favorable analyst notes. Macquarie initiated coverage on the stock with an outperform rating and a price target of $710, implying upside of roughly $710, citing an "attractive, multi-year growth opportunity."
The following week, Argus initiated coverage with a buy rating and a price target of $520, noting that its performance has been strong even as the stock has been hurt by broader concerns about software-as-a-service (SaaS) stocks.
After heating up on a broader rebound in the software sector, the stock fell in line with a post-earnings sell-off in ServiceNow, one of the biggest SaaS stocks, and a stock that has been one of the biggest targets of disruption fears, and it's fallen more than 50% from its peak in late 2024. ServiceNow matched estimates in the quarter, but margin compression sent the stock tumbling and led to fears that its conventional seat-based model is facing a threat from new AI programs like Anthropic's Claude Code.
AppLovin has a much different focus, on adtech, but investors nonetheless see it as having similar vulnerabilities.
Image source: Getty Images.
What's next for AppLovin
AppLovin is set to report third-quarter earnings on Wednesday, and the stock is likely to make a big move. AppLovin has broken out in recent years as it pivoted from being a mobile gaming developer to selling the adtech it developed alongside those games.
Analysts are expecting revenue to increase 19.6% to $1.78 billion, which includes a headwind for the sale of the mobile game business a year ago, and for adjusted earnings per share to jump from $1.67 to $3.45. Considering the company's growth, the stock is starting to look attractively priced at a forward P/E of 30.
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Jeremy Bowman has positions in AppLovin. The Motley Fool has positions in and recommends ServiceNow. The Motley Fool has a disclosure policy.
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