AppLovin (NASDAQ:APP), a firm that assists mobile app developers in publishing and promoting their applications, has excelled over the past year, though it has experienced some ups and downs in 2025. While the stock dropped nearly 57% from the peaks observed in early February 2025 following a report from a short-seller claiming AppLovin violated service terms and exaggerated the success of its e-commerce operations, these claims have yet to be substantiated, and the stock saw a strong recovery after reporting solid earnings in the first quarter. The stock is currently approximately 7% up year-to-date in 2025 and has increased nearly 4.5x over the previous year.
Demand for Axon 2.0, AppLovin’s exclusive machine learning algorithm for ad placement, has surged. The software effectively determines which ad to show, to which user, and at what time in order to optimize click-through rates or user engagement. While this resembles the strategies employed by Meta and Google, Axon is specifically designed for mobile app advertising. The company’s advertising platform reported impressive revenue growth of 71% year-over-year in Q1 2025, achieving $1.16 billion. Overall financial results have also been strong, with revenue soaring nearly 40% year-over-year, and adjusted EBITDA experiencing an increase close to 83%. Although the bulk of the company’s revenue still comes from advertisements for mobile gaming applications, it is concentrating on expanding its e-commerce sector. Nevertheless, it remains uncertain how effective this initiative will be, as AppLovin possesses an extensive dataset in gaming but may lack the comprehensive first-party e-commerce data that competitors like Meta and Alphabet have.
That being said, despite its impressive growth and success, the AppLovin stock may be a challenging choice at its current price of approximately $360. We believe there is little reason for concern regarding APP stock, which makes it appealing, but it is also very responsive to negative events due to its elevated valuation. We reached this conclusion by comparing APP’s current valuation with its operational performance over the past few years, as well as its current and historical financial positions. Our evaluation of AppLovin according to key metrics such as Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company possesses a very strong operational performance and financial standing, as elaborated below. Nonetheless, if you are looking for potential with lower volatility than individual stocks, the Trefis High Quality portfolio offers a viable alternative – having outperformed the S&P 500 and delivered returns greater than 91% since its founding. Separately, see – Should You Buy CRWV Stock After A Whopping 4x Rise?
How Does AppLovin’s Valuation Compare to The S&P 500?
Based on the amount you pay per dollar of sales or profit, APP stock appears to be very expensive relative to the overall market.
• AppLovin has a price-to-sales (P/S) ratio of 25.1 compared to a figure of 3.0 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio stands at 50.8 compared to 20.5 for the S&P 500
• Furthermore, it has a price-to-earnings (P/E) ratio of 67.1 compared to the benchmark’s 26.4
How Have AppLovin’s Revenues Evolved in Recent Years?
AppLovin’s Revenues have substantially increased over the last few years.
• AppLovin has experienced an average revenue growth rate of 23.2% over the last 3 years (versus an increase of 5.5% for the S&P 500)
• Its revenues have risen 41.6% from $3.6 billion to $5.1 billion in the past 12 months (compared to a rise of 5.5% for the S&P 500)
• Moreover, its quarterly revenues increased by 40.3% to $1.5 billion in the most recent quarter from $1.1 billion a year prior (versus a 4.8% increase for the S&P 500)
How Profitable Is AppLovin?
AppLovin’s profit margins are significantly higher than most companies within the Trefis coverage universe.
• AppLovin’s Operating Income over the last four quarters was $2.4 billion, indicating a significantly high Operating Margin of 46.5% (compared to 13.2% for the S&P 500)
• AppLovin’s Operating Cash Flow (OCF) for this period was $2.5 billion, indicating a significantly high OCF Margin of 49.4% (versus 14.9% for the S&P 500)
• For the last four-quarter span, AppLovin’s Net Income was $1.9 billion – reflecting a significantly high Net Income Margin of 37.4% (compared to 11.6% for the S&P 500)
Is AppLovin Financially Stable?
AppLovin’s balance sheet appears solid.
• AppLovin reported a Debt figure of $3.7 billion at the end of the most recent quarter, while its market capitalization is $124 billion (as of 6/13/2025). This results in a very strong Debt-to-Equity Ratio of 2.9%(in contrast to 19.9% for the S&P 500). [Note: A low Debt-to-Equity Ratio is preferable]
• Cash (including cash equivalents) constitutes $551 million of the $5.7 billion in Total Assets for AppLovin. This gives rise to a moderate Cash-to-Assets Ratio of 9.7% (in comparison to 13.8% for the S&P 500)
How Does APP Stock Perform During Economic Downturns?
APP stock has underperformed compared to the benchmark S&P 500 index during several recent downturns. While investors remain hopeful for a smooth economic adjustment in the U.S., the potential consequences of another recession could be severe. Our dashboard How Low Can Stocks Go During A Market Crash illustrates the performance of key stocks during and after the last six market crashes.
Inflation Shock (2022)
• APP stock declined 91.9% from a high of $114.85 on 11 November 2021 to $9.30 on 27 December 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500
• The stock completely rebounded to its pre-Crisis peak by 16 September 2024
• Since then, the stock has risen to a maximum of $510.13 on 17 February 2025 and currently trades at around $360
Covid Pandemic (2020)
• APP stock dropped 36.7% from a high of $88.22 on 17 June 2021 to $55.88 on 16 August 2021, in comparison to a peak-to-trough decline of 33.9% for the S&P 500
• The stock completely recovered to its pre-Crisis high by 14 October 2021
Putting It All Together: Implications for APP Stock
In conclusion, AppLovin’s performance across the parameters mentioned previously can be summarized as follows:
• Growth: Extremely Strong
• Profitability: Extremely Strong
• Financial Stability: Very Strong
• Downturn Resilience: Weak
• Overall: Very Strong
Therefore, despite its high valuation, the stock seems attractive yet volatile due to its poor downturn resilience. This leads us to affirm that APP is a challenging stock to purchase.
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