AppLovin stock was downgraded to neutral by Goldman Sachs Via Investing.com
On Monday, Goldman Sachs adjusted its rating on AppLovin Corp (NASDAQ: ), removing the rating from Buy to Neutral. In line with the change, the firm set a new price objective on the company's stock at $147.00.
The decision to downgrade the stock comes as Goldman Sachs is revising its performance forecasts for AppLovin, specifically considering the company's performance across its two main operating segments. Ahead of AppLovin's third-quarter 2024 earnings, the company revised its revenue forecast upward. This update reflects the strength of AppLovin's current Software offering, including the impact of AXON 2.0, and includes multi-year compound revenue growth analysis for emerging opportunities.
According to Goldman Sachs, AppLovin is on a good path for the second half of 2024, which is consistent with the stable and strong conditions seen in the advertising industry. This positive trend is based on research and analysis of the firm's industry.
In addition, the stability of AppLovin's Apps segment, which mainly includes games, has been noted. Goldman Sachs highlights that the company's strategy focuses on finding the right balance between growth and profitability within this segment. This strategic approach seems to be consistent with the stability of the industry, as revealed by the company's research.
The new target price of $147.00 represents Goldman Sachs' rating for AppLovin's stock based on updated forecasts and industry outlook. This target is set against the background of the company's upcoming earnings report and the overall performance of its key business areas.
In other recent news, AppLovin Corp has been the focus of several analyst upgrades and price target corrections. HSBC maintained its buy rating and raised the stock's price target to $154.40, citing the company's growth momentum in the software platform sector and its successful expansion into online retail marketing. Macquarie also maintained its Outperform rating, with a price target increase to $150, underscoring AppLovin's significant growth and high margins.
Citi raised its price target on AppLovin to $155, maintaining a buy rating, due to increased confidence in the company's potential for software revenue growth. UBS upgraded AppLovin's stock from Neutral to Buy, with a new price target of $145, noting the company's improved visibility on medium-term revenue growth. BTIG maintained a buy rating and raised its price target to $150, indicating a positive view of the company's competitive position and future growth potential.
However, Benchmark maintained a sell rating, raising its price target to $66, citing potential challenges. AppLovin's Q2 financial results showed strong performance, with revenue up 44% to $1.08 billion. The company's future guidance predicts Q3 revenue between $1.115 billion and $1.135 billion, and adjusted EBITDA from $630 million to $650 million.
InvestingPro Insights
AppLovin's recent performance is in line with Goldman Sachs' positive outlook. According to InvestingPro data, the company's revenue growth has been strong, with a 43.98% increase in the most recent quarter. This strong growth is accompanied by a gross profit margin of 71.8% over the past twelve months, indicating good performance.
InvestingPro Tips highlights that analysts expect sales growth this year, supporting Goldman Sachs' upward revision to revenue forecasts. Additionally, the company's revenue is expected to grow this year, which could significantly strengthen its financial position.
The stock's recent performance has been particularly noteworthy, with a price return of 73.23% over the past three months and an impressive return of 281.62% over the past year. This is in line with InvestingPro's tip that AppLovin has shown high returns over the past year.
However, investors should note that the stock is trading near its 52-week high and is highly leveraged, with a P/E ratio of 60.07. This rating suggests that much of the company's positive outlook may already be priced in, which may explain Goldman Sachs' move to a neutral rating.
For readers interested in more comprehensive analysis, InvestingPro offers 21 additional AppLovin tips, which provide deeper insight into the company's financial health and market conditions.
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