Thanks for reading and subscribing TL3 - I just posted this reaction note on AppLovin. I am resharing it here for everyone to see -- I stand by my valuation math from last week!
$APP is down ~19% this morning. Let’s talk about it.
AppLovin reported Q4 earnings last night. The headline numbers were a "beat and raise" across the board:
Revenue: $1.66B (Beat $1.61B consensus)
EPS: $3.24 (Beat $2.96 consensus)
Guidance: Strong.
So why is the stock getting hammered?
As I wrote last week in "AppLovin ($APP) Down -44% YTD: Fear vs. Fundamentals," this stock is a "hedge fund hotel." It is prone to wild momentum swings in both directions. We saw it rip from $370 to $470 on short-covering news, and now we are seeing it flush on valuation fears.
The "Meta Ceiling" The market is currently collapsing multiples across ad-tech/software. As I noted in my Meta pitch yesterday, when investors cut Meta’s multiple, they take AppLovin down with it.
Let’s look at the math:
Meta: Trading at ~22x 2026 earnings.
AppLovin (at ~$370): Trading at ~25x 2026 earnings.
Right now, the market is telling us it is only willing to pay a tiny premium (+3 turns) for AppLovin over Meta.
My Take: This is an overreaction. Paying 25x for this level of growth and execution is a fantastic price.
The market is skittish because the "e-commerce payoff" is a 2026/2027 story. Investors trying to model earnings 2 years out are seeing variability and choosing to compress the multiple today.
What’s Next? Management gave a TON of strategic detail on the call regarding the e-commerce rollout, AXON 2.0, and the competitive landscape with Big Tech. I am digesting the transcript now and will have a full Deep Dive out for subscribers soon.
But for now, as a value investor, I look at the fundamentals. The thesis I laid out last week stands: Fear vs. Fundamentals.
If you liked the stock at $370 last week (before the beat), you should love it here.
Read the last update on the buyback math here. And come back for TMT coverage on Accrued Interest!
Pretty obvious that 'Project Genie' could be bullish for APP. It's almost as if algo's do the selling, not humans.
Awesome - thank you for the detailed and thoughtful response!
Any updates/thoughts on major selloff today?
Thanks for reading and subscribing TL3 - I just posted this reaction note on AppLovin. I am resharing it here for everyone to see -- I stand by my valuation math from last week!
$APP is down ~19% this morning. Let’s talk about it.
AppLovin reported Q4 earnings last night. The headline numbers were a "beat and raise" across the board:
Revenue: $1.66B (Beat $1.61B consensus)
EPS: $3.24 (Beat $2.96 consensus)
Guidance: Strong.
So why is the stock getting hammered?
As I wrote last week in "AppLovin ($APP) Down -44% YTD: Fear vs. Fundamentals," this stock is a "hedge fund hotel." It is prone to wild momentum swings in both directions. We saw it rip from $370 to $470 on short-covering news, and now we are seeing it flush on valuation fears.
The "Meta Ceiling" The market is currently collapsing multiples across ad-tech/software. As I noted in my Meta pitch yesterday, when investors cut Meta’s multiple, they take AppLovin down with it.
Let’s look at the math:
Meta: Trading at ~22x 2026 earnings.
AppLovin (at ~$370): Trading at ~25x 2026 earnings.
Right now, the market is telling us it is only willing to pay a tiny premium (+3 turns) for AppLovin over Meta.
My Take: This is an overreaction. Paying 25x for this level of growth and execution is a fantastic price.
The market is skittish because the "e-commerce payoff" is a 2026/2027 story. Investors trying to model earnings 2 years out are seeing variability and choosing to compress the multiple today.
What’s Next? Management gave a TON of strategic detail on the call regarding the e-commerce rollout, AXON 2.0, and the competitive landscape with Big Tech. I am digesting the transcript now and will have a full Deep Dive out for subscribers soon.
But for now, as a value investor, I look at the fundamentals. The thesis I laid out last week stands: Fear vs. Fundamentals.
If you liked the stock at $370 last week (before the beat), you should love it here.
Read the last update on the buyback math here. And come back for TMT coverage on Accrued Interest!