By AppLovin stock price has bounced back and is slowly nearing its highest point since February. It bottomed at $198.25 on April 7 and then bounced back to $416 today as investors ignore its steep valuation. This article explores whether it is a good stock to buy today for big gains.
AppLovin stock price analysis
The daily chart shows that the APP stock price initially surged to a record high earlier this year, continuing a strong rally that happened in 2024 when it was one of the best-performing companies in the US.
AppLovin shares then plunged as concerns about its valuation and trade emerged. It moved into a bear market as it plunged by over 60% to a low of $200.
The stock has now bounced back and moved to the highest point since February 21. This V-shaped recovery has mirrored the performance of other stocks.
AppLovin’s surge accelerated when it published strong financial results in May. It has now formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other.
The stock has surged above the important resistance at $352, the highest point on March 25. Also, the Average Directional Index (ADX) moved to 25 and is pointing upwards, a sign that it is gaining momentum.
The Relative Strength Index (RSI) is rising and is nearing the overbought level of 70, a sign that the trend is strengthening. Therefore, the most likely scenario is where it keeps rising, with the next point to watch being at $525, which is about 26% above the current level.
APP stock price chart | Source: TradingView
Growth is continuing, but valuation concern remains
The most recent results showed that the AppLovin business was doing well. Its advertising revenue rose by 71% in the first quarter to $1.15 billion.
The advertising revenue was offset by a 14% dip in its app revenue business, whose revenue came in at $325 million. Its total revenue rose by 40% to $1.48 billion.
The company took action to improve its performance by selling its mobile gaming segment to Tripledot Studios for $400 million. It received $150 million in cash and another $250 million in a promissory note. It will then take a 20% stake in Tripledot.
Analysts expect that the company’s growth will moderate this quarter. The average estimate is that the quarterly revenue will be $1.37 billion, up by 27% in the same period last year.
AppLovin will then make $5.68 billion this year followed by $6.8 billion next year. At the same time, its earnings per share are expected to hit $8.56 this year and $10.55 next year.
The main concern is that AppLovin is one of the most overvalued companies in the US, with a trailing price-to-earnings ratio of 75 and a forward multiple of 70. This means that there is a risk that it may go through a valuation reset in the coming months, especially if it publishes weak results.
Read more: AppLovin falls over 13% as short-sellers Culper Research, Fuzzy Panda accuse company of fraud
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