AppLovin is the IBD Stock Of The Day as the mobile-app marketing firm looks to set a new buy point after several rocky weeks. APP stock has pulled back in recent days in light trading volume.
On Nov. 9, APP stock briefly broke out of a double-bottom base after the company posted a beat-and-raise third-quarter report. But investors fretted about the departure of a key executive and the company's growth prospects given its reliance on the mobile games business.
The Palo Alto, Calif.-based company earned 30 cents a share, up 400% year over year, on sales of $864 million, up 21%, in the September quarter. Analysts polled by FactSet had expected earnings of 27 cents a share on sales of $796 million.
For the fourth quarter, AppLovin predicted revenue of $920 million, up 31% and topping views for $834 million.
Chief Financial Officer Departs
Along with its Q3 earnings report, AppLovin announced late on Nov. 8 that its president and chief financial officer, Herald Chen, was leaving those roles at the end of 2023 "to pursue new career opportunities." Chen will remain on the AppLovin board of directors and serve as advisor to the CEO.
AppLovin said Matt Stumpf, current vice president of finance, will take over as chief financial officer. Plus, Dmitriy Dorosh, vice president controller, will become principal accounting officer, the company said in a news release.
In the next trading session, APP stock swung wildly between a gain of 12.4% to a loss of 7.4%. It ended the day down 1.1% to 39.68.
APP Stock Forming Handle
Over the past six weeks, APP stock has formed a cup base with a buy point of 45.10, according to IBD MarketSmith charts. However, it looks to be forming a handle, which would be valid after Wednesday. That handle would have a 44.57 buy point, based on IBD trading principles.
On the stock market today, APP stock sank 2% to close at 40.40. That marked its fourth consecutive down day.
In a report last week, Jefferies analyst Andrew Uerkwitz reiterated his buy rating on APP stock with a price target of 60.
Games Portfolio For Sale?
AppLovin should make "significant share gains" in app advertising in 2024, Uerkwitz said. Possible catalysts in the back half of the year ahead could include success in the connected television market and the possible sale of its video game portfolio, he added.
AppLovin's technology enables developers to publish, market, monetize and analyze their apps. The company also makes mobile games such as "Bingo Story," "Game of War" and "Solitaire Cruise."
Elsewhere, UBS analyst Chris Kuntarich is skeptical about AppLovin's prospects, given its heavy exposure to the mobile games market. In a recent note to clients, Kuntarich said he doesn't see nongaming ad business driving AppLovin's revenue growth. He rates APP stock as neutral with a price target of 46.
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