AppLovin has recently entered the bidding race for TikTok Inc.'s assets outside China, a move that has garnered attention amidst heightened geopolitical complexities. Within the past week, AppLovin's stock remained flat, an outcome potentially informed by broader market downturns driven by pronounced reactions to President Trump's significant tariff announcements. The Dow Jones experienced a significant 4.1% decline, and the Nasdaq Composite entered bear market territory, further amplifying investor caution. AppLovin's potential acquisition of TikTok could bolster its global advertising ambitions, but the market's broad negativity remains a substantial external factor in influencing its stock performance.

We've identified 3 warning signs with AppLovin and understanding the impact should be part of your investment process.

Find companies with promising cash flow potential yet trading below their fair value.

Over the past three years, AppLovin has achieved a very large total shareholder return of 404.97%, highlighting significant growth beyond market averages. Much of this impressive return can be attributed to strategic initiatives such as the shift towards a global advertising platform, which has capitalized on AI-driven enhancements to boost operational efficiency. Earnings growth has been remarkable, with Q4 2024 net income increasing to US$599.2 million from US$172.23 million the previous year. This performance was bolstered by strategic share repurchases, with the company buying back 75.66 million shares since early 2022.

AppLovin's expanding footprint into broader advertising markets, as exemplified by their bid for TikTok's assets outside China, suggests ambitious growth plans. Further enhancing its market presence, AppLovin was added to the NASDAQ-100 index in November 2024, reflecting increased credibility and exposure. Collectively, these developments have been instrumental in AppLovin's long-term stock appreciation, despite market volatility and economic headwinds.

Our comprehensive valuation report raises the possibility that AppLovin is priced lower than what may be justified by its financials.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include NasdaqGS:APP.

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