AppLovin stock blasted off on Thursday after its big beat-and-raise fourth-quarter earnings report. What do IBD trading guidelines say about holding APP stock after such a huge gain?
In morning trades on the stock market today, APP stock rocketed 38% to a record high of 525.04. That put it in the 20%-to-25% profit-taking zone of its breakout from a cup base with a buy point of 417.63, according to IBD MarketSurge charts. However, IBD trading guidelines suggest investors try to hold on to shares for now under the "eight-week hold rule."
Under that rule, if a stock breaks out of a proper base, then rises 20% or more from the proper buy point in one, two or three weeks, investors should sit tight. They should try to hold the stock for eight weeks.
AppLovin retreated from its record heights as the trading day progressed. It ended the regular session on Thursday up 24% to 471.67.
Late Wednesday, AppLovin smashed Wall Street's targets with its fourth-quarter results. The app marketing platform also forecast revenue above estimates for the current period.
The Palo Alto, Calif.-based company said its earnings per share surged 253% year over year to $1.73 while revenue increased 44% to $1.37 billion in the December quarter. Analysts had expected earnings of $1.25 a share on sales of $1.26 billion.
For the March quarter, AppLovin forecast revenue of $1.37 billion, up 29%, which topped views for $1.32 billion.
AppLovin To Sell Games Unit
In other news, AppLovin plans to divest its mobile games business. The business is valued at $900 million. AppLovin will receive $500 million in cash from a private acquirer and the rest as a minority equity stake in the combined company. It expects to complete the transaction in the second quarter.
With the sale, AppLovin will transition to a pure advertising platform business, Chief Executive Adam Foroughi said on a conference call with analysts.
APP Stock Scores Price-Target Hikes
At least nine Wall Street firms raised their price targets on APP stock after the Q4 report.
Wedbush Securities analyst Michael Pachter reiterated his outperform rating on AppLovin stock and raised his price target to 620 from 545.
AppLovin is poised to gain a greater share of marketing spending by mobile game developers, Pachter said in a client note. AppLovin also is using its ad technology to help e-commerce companies identify likely purchasers of their products, he said.
AppLovin is on three IBD stock lists: Leaderboard, SwingTrader and Tech Leaders.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
