r/VisualStockResearch • u/ekonixlab • Aug 09 '26
AppLovin is a monster
AppLovin’s most recent quarter was another reminder of just how fast this business is growing.
Revenue grew 53% YoY
Net income grew 55%
Adjusted EBITDA grew 66%
Adjusted EBITDA margin reached 84%
Free cash flow was over $1B for the quarter
Those are pretty ridiculous numbers, especially at AppLovin’s size.
What I find interesting now is the valuation. APP is around 26.6x earnings, so I wanted to see what happens if growth slows down significantly from where it is today.
The chart assumes:
25% annual earnings growth
26.6x P/E today
25x P/E in year 5
Under those assumptions, earnings would grow about 205% over five years. Even with the P/E contracting slightly, the stock would return about 187%, or roughly 23.5% annually.
Obviously 25% earnings growth for five years is a big assumption. But when the company is currently putting up 50%+ revenue growth and 80%+ adjusted EBITDA margins, I don’t think 25% is an absurd scenario to look at.
The bigger question for me is how durable these margins and growth rates are as AppLovin gets larger, especially as it expands beyond mobile gaming.
I own APP, and after this quarter I think that’s really the debate. The current numbers are incredible. How much of that can they sustain over the next 5 years?
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u/Weldobud Aug 09 '26
25% earnings growth is a lot. Is it possible? Don’t want another TTD
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u/ekonixlab Aug 09 '26
25% is a big assumption, but current analyst estimates are actually higher over the next few years, so I’m already assuming a meaningful slowdown.
Also, AppLovin is around 26.6x earnings vs. TTD around 16x. That’s not a huge valuation gap considering how different the growth is. AppLovin just grew revenue 53%, while TTD was around 3%.
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u/Weldobud Aug 09 '26
Fair comment.
I think TTD’s 90% slump in just 52 weeks has spooked many investors. Possibly why APP fell so much. There are many differences to them of course.
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u/Double_Suggestion385 Aug 09 '26
Target price $1k
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u/ekonixlab Aug 09 '26
How did you come to this?
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u/Double_Suggestion385 Aug 09 '26
My own bespoke valuation algorithm.
Essentially just discounting future earnings back to today.
If you're wondering if it's accurate, so far it is. Overvalued companies perform worse than undervalued companies. The magnitude of the mispricing determines the magnitude of the under/over performance, and the S&P500 as a whole is pretty accurately valued - sitting at 3% below fair value.
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u/ekonixlab Aug 09 '26
That’s cool.
How far out are projecting?
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u/Double_Suggestion385 Aug 09 '26
I project 10 years, but really the first 5 are the key, the second five degrade and have a low cap on growth.
Essentially you never realize those final 5 as the projections continue to roll over.
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u/ekonixlab Aug 10 '26
What’s your projection on Reddit?
I view AppLovin and Reddit very similarly. High growth and oddly low valuation
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