Jefferies continues to recommend AppLovin with a Buy rating and a $860 price target, saying the stock's roughly -39% year-to-date decline has opened up what the firm calls a "great buying opportunity." Analysts led by James Heaney argue the pullback has produced a valuation that does not reflect the company's growth prospects.
In a research note, the Jefferies team emphasized that the -39% YTD move contrasts with what they view as a 50%+ top-line growth story trading at about 15x their FY27 EBITDA forecast. "We believe the -39% YTD decline in APP's stock is a great buying opportunity for a 50%+ top-line growth story trading at 15x our FY27 EBITDA," the analysts wrote.
Jefferies addressed several of the market concerns that have pressured the shares. The firm described worries tied to CloudX, Meta's Audience Network and Google Genie as near-term issues that have been amplified, producing a valuation dislocation ahead of what Jefferies expects will be a meaningful upside relative to consensus in the fourth quarter.
On CloudX specifically, Jefferies sees essentially "near zero impact," noting the historical absence of a successful standalone mediation platform. Regarding Meta's Audience Network, the note acknowledged the potential for heavier bidding into iOS traffic to present a challenge, but the analysts said they found limited evidence that such pressure is materializing today.
With respect to Google Genie and the rise of generative AI-driven gaming content, Jefferies anticipates new technologies will be adopted into existing game engines, which could in turn make AppLovin's distribution capabilities more valuable rather than destructive.
Looking toward the fourth quarter, Jefferies outlined an upside scenario in which revenues could top $1.66 billion, implying a potential high-end beat of more than $60 million. The firm noted that company guidance currently does not assume an additional holiday spending ramp from new customers, leaving room for upside if that ramp materializes.
Surveys of mobile gaming and e-commerce advertisers referenced by Jefferies were described as constructive, and the analysts highlighted AppLovin's penetration into e-commerce ad budgets, citing that the company already accounts for roughly 14% of e-commerce ad spend among its existing customers.
For the first quarter, Jefferies expects guidance to imply low-single-digit sequential revenue growth, primarily driven by mid-single-digit expansion in gaming and conservative assumptions about e-commerce seasonality. The analysts said this could be at least partially offset by ramping new advertisers - creating potential upside if new customer contributions more than compensate for typical seasonality.
Comparing valuation and growth, Jefferies pointed out that trading at about 15x their FY27 EBITDA estimate versus an implied roughly 40% five-year compound annual growth rate means the market price, in their view, already factors in the primary risks. "With underlying fundamentals largely unchanged since the start of the year, the recent pullback offers an opportunity to own a unique growth asset at a compelling entry point," the note concluded.
Summary
Jefferies reiterates Buy and a $860 target on AppLovin after a near 40% YTD decline, arguing market concerns around CloudX, Meta Audience Network and Google Genie overstate near-term threats and that Q4 may produce a material upside to consensus.