$APP · Learn to Invest - Investors Grow · 2026-10-30

In this video, we take a look at the company " AppLovin", whose stock symbol is APP. We will take a quick look at the company's business, review some figures, and then try to determine the fair value of AbbLovén's stock to see if investing in it is worthwhile today.

Interestingly, when we look at the graph of AbbLovén's stock performance over the course of a year, we see that the stock has suffered heavy losses during the past year. UpLovin works in the field of advertising technology, and it helps companies find customers.

Imagine you are using your phone and playing a game, and sometimes ads appear within the game, which may be for another game or a specific product. This is exactly what the company "Up Lovin" does.

" Ab Lovin's" mission is to connect advertisers with customers.

If you have a business and want people to download your game, you might advertise it within another game, so that users click on it and download your game. They watch a demo of the game and say, "Oh, this game is amazing."

Then they download it. Well, the advertiser is the one who will pay for that. To simplify the numbers, let's assume the advertiser paid $100. Based on my research , it appears that "UpLovin" keeps about $30 to $40 of that advertising money, and in this example, let's say $60 to $70 will go to the app that the ad was running on .

If you are playing, for example, the game "Wordle" and an advertisement appears, "Wordle" will receive $60 to $70, while " ApLovin" will receive the remaining $30. Those $30 is practically the company's revenue.

Looking at this chart, one of the key things I looked into while reviewing what happened to the company over the past year is that it is primarily about expectations. Investors had been expecting continued high-speed growth , and recently, whether due to concerns about artificial intelligence or competition, such as Meta and others, there are many companies competing in the field of AppLovin's work.

So, the question is: can they grow as much as investors initially expected? Investors clearly doubt this, so the stock price has fallen sharply.

Now, having said that, let's move on to look at some actual figures, because when we look, for example , at AppLovin's revenue, we find that it has grown well. Now, looking at these revenues, I actually think this indicates more about the overly optimistic expectations that investors had previously.

Because, as we can see, they have almost tripled their revenue in two years, which is good, but investors were expecting more.

And when we move on to look at something like operating profit, which measures the percentage of revenue that turns into operating income, well , you can see that these numbers climb nicely.

You want these numbers to be higher. The higher it is, the better for investors. The numbers performed fairly well . The same applies when we move on to look at net income margins.

Net income margins also performed well, but again, investors seemed dissatisfied with the whole thing.

But now, here's where the story gets a bit interesting , because in August when AppLovin announced its earnings, they explained that revenue had actually grown by a good amount.

We saw that in the revenue. We saw that in operating income. But one of the reasons wasn't really growth in the volume of use they had , but rather growth in the cost of advertising.

So , the cost of advertising has increased, which, by the way, will be reflected in profits. This partially explains why we are seeing higher net income . The problem with that is that this cannot continue to rise indefinitely.

You can't squeeze advertisers any more than that, and there's a great deal of fear that advertising usage itself wasn't necessarily increasing, but rather that inflation was driving it up.

I mean, it was more than just inflation, but basically it's the same thing. If this is the case, then this is not truly sustainable. It is not a sustainable business model, which also partly explains why the stock has experienced such a significant decline.

Now , I should also point out that in the same time period in August, AppLovin also reported having questions about their data collection policies. They denied committing any wrongdoing.

As I expected from them , and as most companies do. The Securities and Exchange Commission investigated them, but I was unable to find a definitive conclusion regarding them. It seemed as though there was no physical evidence to incriminate them.

Nothing seemed to have resulted from it , but in either case, it certainly did not help improve sentiment towards the stock.

So, they faced a fair amount of bad news that caused this rather significant decline , despite the fact that they saw an increase in revenue and profits, and you know what? They are likely to continue to grow if they can do a good job of connecting advertisers with customers.

That was one of their major directions, and they did quite well, especially with their introduction of artificial intelligence and taking advantage of the idea that "this customer is the most likely to download the new game you created" .

So, you advertise and they can connect you with them, and as far as I understand, they had a fairly good conversion rate.

I looked at different people who tried to use it. I have, you know, tried watching videos and interviewed a couple of people who have actually used the app , and it seems, well, yes, it is a very good app.

From an advertising perspective, you get very good value for what you spend . And considering the person I spoke to was advertising, he advertises heavily on Google. He advertises on Meta.

He advertises on AppLovin and some other platforms. But in both cases, he said that Ab Lovren's numbers were very good. He was getting a very good return on his investment there.

So, in my opinion, well, Ab Lovne definitely offers value to the business .

I think this raises a bigger question: Has the market oversold due to some bad news and undoubtedly due to slowing growth? Now, I will also point out that this will be a somewhat cyclical business activity, as it will move with the cycles of the economy.

If the economy starts to suffer , and the economy has suffered a fair amount recently , you may spend less money on advertising. In a booming economy, where interest rates are low and everything is thriving.

Okay, then that's fine, more people will advertise. This will put pressure on this work. Therefore, this might make this a good time to consider a company like Ab Lovne.

However, when we move on to look at the outstanding shares, we can see that they had been increasing their shares for a while, but have since stabilized somewhat , and perhaps even declined slightly, which means they have repurchased some shares.

Okay, now let's move on and look at some cash flow figures to see what the stock could be worth today. First, we look at the operating cash flow. We can see that operating cash flow, just like revenues, has increased significantly.

So, perhaps this is not surprising. When we turn to look at free cash flow, we find that free cash flow looks very similar. This company actually has very small capital expenditures, so free cash flow tends to closely track cash flow from operations.

Now, in order to use discounted free cash flow, we can look at analysts' estimates for the next few years. Therefore, looking only at analysts’ estimates for the next three years, it is interesting that we end up with a fair value for this company using discounted free cash flow of about $336 per share.

We can see on the "Investors Group" website that we have quite a few analysts who come up with each of these figures. We have 23 analysts in the first year, 19 analysts in the second year, and 10 analysts in the third year.

Therefore, these figures are somewhat conservative . We can see that they expect continued growth, and the assumption here is that if it grows this amount and then grows by 2.5% after that, the stock could be worth around $336.

This means an increase of about 28%, so it looks pretty good .

I was curious and started playing with the numbers and wanted to see, what if we lowered the expectations a little? What if we took the analysts' estimates and reduced them by 15% each year, for example?

Well, now the stock will be valued at approximately its fair value. So, if we think that growth will not be as expected by analysts, or perhaps there will be pressure on the overall economy or something like that .

Well, just a 15% decrease in each of the next three years, the gold-yellow bands would be those estimates. I think it's a bit too conservative , but if we're curious, it makes the stock feel fairly valued right now .

Therefore, we can see that if those golden bars are realized , we will get an implied return of approximately 9%, but if we go back to the green bar only, the implied return is close to 11%.

Okay, let's review this by looking at the value zones chart in "Investors Grow". So, these valuable areas, again, are where we measure what if you had bought the stock when it was in the green zone?

What if I bought it when it was in the red zone? Well, if I had bought it when it was green, I would have made a profit of over 300%. If you had bought it when it was red, you would still have made a profit.

I would have made a profit of approximately 20%, but not as much if I had bought it at a discounted price. In any case, this confirms that buying shares at a discount makes sense , and according to the forward price-to-earnings ratio, the stock appears to be discounted at the moment .

Therefore, I think it is an interesting company to consider adding to our investment portfolio. As for me, I will put this company on my watch list . I hesitate to add it to my personal portfolio simply because, frankly, I am already exposed to the risks of the advertising world.

I own Google shares in my portfolio. I own Meta shares in my portfolio. I have many similar stocks of this type. I think it's a great company, and I believe it will perform well over the next decade.

It is currently available at a reasonable price. I want to see what happens next. Will the stock continue to decline? That's why I'm going to put him on the watch list. As for my own wallet, I am hesitant about how suitable it is for it at the moment .