Why investors have been so sweet on AppLovin’s stock this week

News coming straight from the app monetization specialist AppLovin (APP 0.68%) it’s been fairly easy over the past few days, yet investors were eager to get their hands on the stock. Much of this had to do with a recommendation update from a newly created AppLovin bull. As a result, the company’s share price has improved by more than 10% year to date as of Friday morning, according to data compiled by S&P Global Market Intelligence.

An underrated operator

The analyst responsible for the upgrade is UBSJohn Hodulik, whose new recommendation is a buy with a price target of $145. This represents a significant change in sentiment for Preacher, who previously rated AppLovin as neutral with a fair value estimate of $100 per share.

Hodulik was bullish on the combination of encouraging medium-term revenue growth and the company’s modest valuations. It also feels like management is actually getting a lot of bang for their buck, so to speak.

In the latest analyst note on the company, he wrote that “improved relative return on ad spend (ROAS) over competing channels is rarely seen in the digital ad space and could support software revenue growth of 20-30% from games”.

Joining the club

The UBS expert is not alone in his optimistic assessment of AppLovin’s potential. As the company reported a second quarter that beat analysts’ consensus estimates for both trailing net income and current quarter revenue, plenty of pundits raised their price targets. Collectively, they expect very robust growth; Net income in 2024 is expected to more than triple year-over-year to $3.44 on the back of 35% revenue growth.