Analysts Are Slashing Price Targets on AppLovin Stock. Here's Why.

AppLovin (APP) shares crashed on Aug. 6 after a Q2 revenue miss and muted future guidance prompted several Wall Street analysts to lower their price targets on the mobile technology company. Management now expects revenue to print at $2.075 billion in the third quarter, marginally below the $2.08 billion consensus. 

Street downward revisions are particularly significant given AppLovin stock is already down about 50% versus its year-to-date high. 

RBC’s Revised Outlook for AppLovin Stock

RBC analysts highlighted performance challenges within APP’s gaming business and a “lighter-than-expected pace of model improvements" for lowering their price target. 

The firm maintained an “Outperform” rating on AppLovin shares, but the Q2 revenue coming in about 0.9% shy of expectations made it lower the price target to $575. RBC previously had a much higher $700 price target on APP. 

Needham’s Lowered Price Target on APP Shares

Needham analysts reinforced that the overarching growth thesis remains intact, but acknowledged near-term concerns about delayed consumer ad tools and softening ad revenues. 

Much like their peers at RBC, Needham also maintained their “Buy” rating on APP shares, but lowered the price target to $500, down nearly 29% versus their previous call. 

However, strong holiday ad spend can restore AppLovin’s premium multiple, the firm added. 

Wells Fargo Downgrades AppLovin

Wells Fargo took an even stricter stance, downgrading APP stock to “Equal-weight” and lowering its price target to $357. 

The investment firm cited a “plateau” in mobile game wallet share, adding that AppLovin accounts for roughly 50% of user acquisition spend in mobile gaming and appears to be approaching a growth ceiling.

Future expansion, according to its analysts, will rely heavily on overall market growth and take-rate expansion — drivers that Wall Street typically values at lower valuation multiples.

How to Play APP at Current Levels

Several other Wall Street firms, including Piper Sandler, Deutsche Bank, and Raymond James, also lowered price targets on AppLovin after Q2 earnings. 

Investors must note, however, that the downwardly revised price objectives for APP still represent significant upside from its current price of nearly $336.

A relative strength index (RSI) in the late 20s also suggests “oversold” conditions that often trigger a relief rally.