By Mackenzie Tatananni

AppLovin stock has fallen on hard times after topping the list of Nasdaq 100 gainers in 2024, but one Citi Research analyst urges investors to "keep calm and carry on," saying he sees room for gains in 2025.

Analyst Jason Bazinet noted that AppLovin shares had "come under significant pressure on the heels of a few bearish reports," which was only compounded by a broader sell-off in momentum stocks.

Shares of the mobile-technology company were down 8.4% to $247.69 in premarket trading Monday, on pace for the lowest close since Nov. 7, when the company reported its third-quarter earnings.

The stock sank on the heels of separate reports from short sellers Fuzzy Panda Research and Culper Research last month. They claimed AppLovin created ads in violation of the terms of the Google and Apple app stores, among other allegations.

While the stock has fallen from its record high of $510.13 in mid-February, it has still gained just shy of 351% over the past 12 months.

Valuations of peer companies suggest the market is now pricing in a 50% likelihood that AppLovin's equity will turn out to be worthless, Bazinet wrote.

In his view, this likely has less to do with the merits of the short sellers' claims and is more about the company's "rapid success, opaque business model and investors' long-held skepticism about AdTech business models."

Bazinet maintained a Buy rating and $600 price target on the shares, suggesting a potential upside of 136%.

While Wall Street's expectations for revenue are high, there are reasons to be optimistic, Bazinet said. For starters, the company's fundamentals appear to be sound, with recent disclosures suggesting that AppLovin's eCommerce pilot program generated around $100 million of revenue in the fourth quarter of 2024.

"That's a solid start is a large, untapped market," Bazinet wrote. "We suspect eCommerce revenues will improve as the pilot expands and self-serve tools are launched later in 2025."

The analyst also believes the firm could buy back as much as $1.2 billion of stock in 2025, with changes to the firm's share repurchase program implying that 100% of free cash flow could be directed toward buybacks this year.

While Citi's estimates for AppLovin's advertising revenue for 2025 through 2027 are below the Street's consensus view, "even with our lower estimates we still find the equity compelling at prevailing multiples," Bazinet wrote.

He isn't the only bull. Of 29 analysts polled by FactSet, 21 rate AppLovin at Buy or the equivalent, six rate it at Hold, and two have it at Sell or the equivalent.

Investors were eyeing AppLovin as a potential candidate for inclusion in the S&P 500 last week, but DoorDash, Williams-Sonoma, and TKO joined the index instead.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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March 10, 2025 09:26 ET (13:26 GMT)

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