Investment Insights - AppLovin Inc. (APP)

START - $557.50 | FINISH - $724.80

1. HORIZON: 0 - 3 months (Short-Term)

2. FROM: 29 January 2026 | UNTIL: 28 April 2026

3. MANAGEMENT ASSESSMENT: 30% growth

4. RECOMMENDATION: BUY

5. PROJECTION BASED ON: R15 000

TRADING PLAN

●     Potential entry: Consider initiating a position after the stock closes above $557.50.

●     Risk management: A protective stop-loss should be placed at approximately $472.40, limiting the potential loss to around 15% from the entry point.

●     Profit target: The primary price target sits at $724.80, representing a potential 22.50% gain from the current price.

WHY THESE SHARES HAVE POTENTIAL FOR PROFIT

●     Dominance of the AXON 2.0 AI engine

AppLovin’s success is its powerful AI advertising engine, AXON. The latest version, AXON 2.0, has been a game-changer, allowing advertisers to target users with unprecedented accuracy, which leads to higher returns on their ad spend. This technology is so effective that it has allowed AppLovin to expand beyond its core mobile gaming market into the much larger e-commerce advertising space, creating a new and significant revenue stream.

●     Revenue growth and profitability

In Q3 of 2025, the company’s revenue surged 68% year-over-year to $1.41 billion, beating analyst expectations. Moreover, its net income nearly doubled, growing 93% to $836 million. This shows that the company is not just growing its sales but is also becoming increasingly profitable.

●     Massive cash generation and shareholder returns

The business model is cash-generating. In Q3 2025 alone, the company generated $1.05 billion in free cash flow. The company is using this cash to reward its shareholders directly. It has a $3.3 billion share repurchase authorisation, which is a massive commitment to buying back its own stock. By reducing the number of shares on the market, these buybacks make each remaining share more valuable.

●     Strong guidance and analyst confidence

Wall Street is taking notice of AppLovin’s performance. The company has provided very strong guidance for Q4 of 2025, expecting revenue to be between $1.57 billion and $1.60 billion. This has led to a wave of analyst upgrades, with a median price target of $774.50, implying upside from current levels. Some analysts have targets as high as $860.

TECHNICAL INDICATORS

The technical setup for AppLovin suggests the stock has completed a consolidation phase and may be preparing for the resumption of its uptrend, with multiple indicators aligning to support a bullish outlook.

●     Successful test of key support

      The stock price has been consolidating in a range between resistance at $734 and support at $515. Recently, the price tested the lower support level at $515 and has since reversed direction, and is heading upwards now. This successful test of support indicates that buyers are stepping in at this level, viewing it as an attractive entry point and confirming the strength of the underlying demand.

●     Long-term trend remains bullish

      The stock price is trading well above its 200-day simple moving average (SMA), which is a key indicator of a healthy long-term uptrend. This positioning confirms that despite the recent consolidation, the bulls remain firmly in control of the primary trend and that the stock has strong foundational support from long-term investors.

●     Momentum shift on the horizon

      The moving average convergence divergence (MACD) indicator is poised for a bullish crossover, where the MACD line is about to cross above its signal line. This pending crossover suggests that the recent period of sideways trading and downward pressure is coming to an end, and that upward momentum is beginning to build. Once confirmed, this would provide a strong technical signal that the stock is ready to break out of its consolidation range and move toward the upper resistance level.

RISKS

●     High valuation and market expectations

AppLovin’s stock is expensive, trading at a price-to-earnings (P/E) ratio of over 60, which is higher than many other tech companies. After a surge of over 100% in 2025, the market has priced in massive future growth. This means that if the company’s growth slows down or it fails to meet these very high expectations, the stock price could fall sharply, as there is little room for error.

●     Intense competition from tech giants

AppLovin operates in the highly competitive digital advertising space and is in direct battle with some of the largest companies in the world, including Google and Meta. These giants have vast resources, extensive user data, and control over the digital ad environment. While AppLovin’s AI is currently performing well, it faces a constant threat from these powerful competitors who are also investing heavily in their own AI advertising technologies.

●     Dependence on Apple and Google platforms

AppLovin’s entire business model is built on the mobile app ecosystem, which is controlled by Apple (iOS) and Google (Android). These platform owners can change their rules at any time, which can have a massive impact on AppLovin’s business.

SOURCES

●     AppLovin Q3 Earnings Report

●     A Once-in-a-Decade Investment Opportunity: The 2 Best AI Stocks to Buy Now

●     A Look At AppLovin (APP) Valuation After Money Laundering Allegations And Sharp Share Price Declines

Disclaimer:
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** This article was prepared by BROKSTOCK analyst Maboko Seabi