AppLovin's third-quarter results and fourth-quarter guidance both topped analyst expectations, lifting a stock that had spent much of the year under pressure. A Motley Fool analyst argues the valuation still looks low relative to growth.
AppLovin shares rose 9.86% to $391.22 as of 4:00 PM ET on November 6, after the adtech company's third-quarter results beat expectations. The stock had spent much of the year under pressure as investors worried about rival Unity Software's progress.
Revenue beats the consensus
Third-quarter revenue soared 55% to $2.18 billion, topping the $2.07 billion analyst consensus compiled by Bloomberg. Its gaming business grew nearly 50%, helped by the partial rollout of a transition to a new model.
The consumer vertical contributed too. Its revenue grew by triple digits year over year, and the company believes the vertical will help it compound at 30% annually over the long term.
Earnings and cash flow climb
Profit measures also came in ahead of expectations. EPS from continuing operations climbed 76% from $2.39 a year ago to $4.30, topping the consensus by $0.26. Adjusted EBITDA rose 59% year over year to $1.84 billion.
The company generated free cash flow of $1.4 billion in the quarter. It also repurchased 4.1 million shares worth $1.4 billion, and ended the quarter with just over $340 million in net debt, down from $1 billion at the start of the year.
Guidance tops estimates
For the fourth quarter, AppLovin projected revenue between $2.365 billion and $2.395 billion, growth of 43% to 44%. The analyst consensus stood at $2.25 billion, and the company guided for adjusted EBITDA between $1.995 billion and $2.025 billion.
Motley Fool analyst Geoffrey Seiler argues the stock still looks cheap, pointing to a forward price-to-earnings ratio below 18 times 2027 analyst estimates.
Source: The Motley Fool
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