Wall Street welcomed the new ad model, seeing further room for growth as the rollout expands.
- Oppenheimer raised its price target on APP stock, citing that AppLovin’s Q3 results had restored investor confidence in AppLovin’s execution.
- Meanwhile, Morgan Stanley called AppLovin’s new advertising revenue model a “major” breakthrough for the company’s gaming business.
- BTIG, Piper Sandler and others also credited the new model for stronger gaming advertising growth.
AppLovin (APP) shares jumped in the morning trade on Thursday, on track for their best day in nearly two years, after the company’s third-quarter results eased Wall Street’s concerns about declining growth.
According to a note to investors cited by TheFly, Morgan Stanley raised its price target on APP stock to $450 from $400 and kept an ‘Overweight’ rating. The firm said the third quarter (Q3) results “directly challenge concerns” that AppLovin’s growth was slowing because of a lack of innovation and rising competition. It called the company’s new ad model a “major model breakthrough” for its core gaming business.
APP stock rocketed over 32% in the morning trade and was among the top-trending tickers on Stocktwits at the time of writing. The last time the shares saw a comparable surge was in late November 2024.
Wall Street Hikes APP Stock Price Targets After Earnings
Among the price target hikes cited by TheFly, Evercore ISI set the highest target for Applovin shares, raising it to $540 from $510 with an ‘Outperform’ rating.
Oppenheimer, which raised its price target to $520 from $490, echoed Morgan Stanley’s sentiment, stating that AppLovin’s Q3 results restored investor confidence in its execution.
Meanwhile, Goldman Sachs raised its target to $445 from $400 but kept a ‘Neutral’ rating of APP stock.
AppLovin’s New Ad Model Draws Wall Street’s Attention
AppLovin operates an advertising platform that helps app developers, particularly mobile game makers, find new users. Its software uses data to predict which ads are most likely to prompt users to take action.
During the quarter, the company began rolling out a new version of that technology. BTIG described it as a hybrid of a recommendation system and a large language model, the technology used in AI chatbots. The firm called the rollout a key driver of the quarter’s results, while noting that further deployment could lead to additional estimate revisions.
Piper Sandler also pointed to the new model’s contribution to gaming growth, saying it had a “material impact” during the quarter. The firm described the results as AppLovin’s strongest revenue beat since the first quarter of 2025, despite “largely negative buyside sentiment” heading into the report.
CEO Adam Foroughi said on the earnings call that the new design allows AppLovin to train larger models and gives the company more room to improve the technology. He did not provide a timeline for completing the rollout.
APP Q3 Earnings Recap
AppLovin’s Q3 revenue rose 55% from a year earlier to $2.19 billion, topping analyst estimates of $2.07 billion, according to Koyfin, and coming about $100 million above the high end of the company’s own forecast. Revenue from its gaming advertising business increased nearly 50%.
The company reported earnings per share (EPS) of $4.30, beating the consensus estimate of $4.03. It forecast fourth-quarter revenue of $2.37 billion to $2.40 billion, above analysts’ estimate of $2.25 billion.
Competitor Unity Software (U) reported its quarterly results before the bell on Thursday, showing growth in its AI-powered Vector advertising engine. U stock was up around 10% at the time of writing.
How Is Retail Feeling About APP Stock?
On Stocktwits, retail sentiment around APP stock shifted to ‘extremely bullish’ from ‘bullish’ territory over the past day, while chatter increased to ‘extremely high’ from ‘high’ levels. Platform data showed an over 700% increase in message volume in the last 24 hours.
Despite Thursday’s rally, APP stock remains down by over 40% for the year.
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