AppLovin (APP) Valuation in Focus After S&P 500 Entry and Rising Non-Gaming Growth Prospects

If you have been eyeing AppLovin (APP) lately, its recent move into the S&P 500 Equal Weighted Index may have caught your attention. The inclusion, which happened just after the company exited the Russell Small Cap Comp Growth Index, could be a significant development for investors wondering if this signals a new chapter. The timing also aligns with Wall Street analysts highlighting a surge in AppLovin’s non-gaming revenue, with updated forecasts pointing to tangible momentum from new marketing initiatives and onboarding programs. Suddenly, there is increased buzz around where AppLovin’s business and its stock price are headed next.

This event is more than just a technical change in which index tracks AppLovin. Over the past year, its shares have soared over 400%, far outpacing broader market gains and suggesting ongoing optimism about its growth prospects. In the last month alone, the stock climbed nearly 46%, putting it firmly in record-high territory. These developments add to AppLovin's double-digit annual gains in both revenue and net income, as well as strong demand for its advertising platform.

After such a powerful move higher and growing attention from both institutional and retail investors, the question is whether AppLovin’s current price truly reflects the next wave of growth or if an opportunity still exists for those ready to act.

Most Popular Narrative: 24% Overvalued

The dominant narrative suggests AppLovin is trading above its fair value, with analysts projecting robust operational momentum but cautioning the share price currently runs ahead of fundamentals.

Expanded rollout of the self-service AXON ads manager and Shopify integration is expected to open AppLovin's platform to a massive new base of small and mid-sized advertisers globally. This could dramatically increase advertiser count and drive sustained uplift in topline revenue.

Ever wondered what assumptions are fueling this sky-high price call? There are bold predictions about future revenue streams, surging profits, and a market multiple that rivals the top names in tech. Learn how ambitious projections for revenue, profit margins, and platform expansion are combined to justify this eye-catching valuation.

Result: Fair Value of $517.81 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, potential regulatory shifts or a slowdown in mobile gaming could present challenges to these upbeat forecasts and alter AppLovin's growth trajectory.

Find out about the key risks to this AppLovin narrative.

Another View: The SWS DCF Model

While analysts see AppLovin as overvalued based on market assumptions, our SWS DCF model arrives at a different conclusion and indicates the shares may still be priced above intrinsic value. Could market optimism be overshooting the fundamentals?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AppLovin for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own AppLovin Narrative

If you have a different perspective or want to investigate the numbers firsthand, it only takes a few minutes to shape your own take on AppLovin’s story. Do it your way.

A great starting point for your AppLovin research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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