Prior to the broader market selloff over the last week, AppLovin APP had been one of the hottest stocks this year. Allowing developers to publish and monetize mobile applications, AppLovin has been one of the top performing IPO’s in recent years after going public in 2021.

With it seeming like every company has an app outside of their flagship website nowadays, APP shares had ripped to a new all time-high of $525 a few weeks ago. That said, AppLovin stock has fallen 36% from these peaks and investors may be wondering if APP can start to bounce back.

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Positive EPS Revisions

After such a roaring rally, AppLovin stock has been very susceptible to recent market volatility but the main catalyst to its strong price performance beforehand is still apparent. This is the trend of positive earnings estimate revisions, which suggests APP could bounce back when markets stabilize.

AppLovin’s fiscal 2025 EPS estimates are up 16% in the last 60 days from $5.89 to $6.87. This comes as AppLovin beat Q4 EPS expectations for FY24 by 29.1% earlier in the month. Bolstering AppLovin’s strengthening outlook is that FY26 EPS estimates have soared nearly 29% over the last two months, from $7.31 to $9.42.    

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Monitoring AppLovin’s P/E Valuation

Amid the recent pullback, AppLovin stock is trading at a much more reasonable forward earnings multiple of 48.2X with high double digit EPS growth in the forecast for FY25 and FY26. Optimistically, APP now trades nicely beneath its one-year high of 98.9X forward earnings and closer to its 12-month median of 29.6X.  

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Conclusion & Final Thoughts

Expecting double digit sales growth in FY25 and FY26 as well, AppLovin’s increased probability is hard to ignore, even amid recent market volatility. APP has triggered a Zacks Rank #1 (Strong Buy) rating thanks to the trend of rising EPS revisions.

Furthermore, APP is starting to look like a buy the dip target given the leveling of its P/E valuation. This is reassuring to long-term investors and alludes to the notion that the recent pullback in this popular growth stock was a healthy correction.

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This article originally published on Zacks Investment Research (zacks.com).

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