AppLovin CorporationAPP42,67 $
Today we have a speculative idea: take shares of IT business AppLovin (NASDAQ: APP), in order to make money on their rebound after a strong drop.
Growth potential and validity: 21% behind 15 Months; 48,5% behind 3 of the year; 82,5% behind 6 years; 11% per annum during 15 years.
Why stocks can go up: because they fell hard, and the company can be bought.
How do we act: we take shares now by 43,75 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
The company makes software for application developers, оно позволяет разработчикам оптимизировать управление маркетингом и монетизацией их приложений. According to the company's annual report, its revenue is divided into two segments.
Enterprises — 48%. This is money, получаемые компанией с корпоративных заказчиков. Segment revenue is divided into two parts:
- ПО-инструментарий компании — 50,5%.
- Реклама в приложениях — 49,5%.
Consumers — 52%. У компании есть 350 условно-бесплатных мобильных игр, в которых игроки могут платить за внутриигровые покупки. Из этих покупок и складывается выручка сегмента.
In the US, the company makes 60,4% proceeds, and 39.6% give others, unnamed countries.
The company is unprofitable.
Arguments in favor of the company
Fell down. Акции компании сильно подешевели за эти 8 Months: с 112 до 43,75 $. Сейчас их цена ниже 80 $, prices, for which the shares were placed during the IPO. It seems to me, это дает нам возможность заработать на отскоке этих акций после падения.
Promising. Both areas of the company's work are quite promising.: цифровизация и до пандемии была делом перспективным, а теперь уж точно будет проводиться форсированным путем. Посему я бы ожидал от AppLovin хороших темпов роста. Особенно от ее корпоративного сегмента.
Fine. На операционном уровне компания более-менее прибыльная, а итоговая отрицательная маржа ее бизнеса не так ужасна. С учетом указанного выше момента про растущий рынок кажется, что у ее бизнеса есть неплохие перспективы по выходу на прибыльность в не таком далеком будущем.
Well done too. «Корпоративно ориентированная» часть бизнеса компании может похвастать крутейшим уровнем удержания выручки — 137%. This means, что из имеющейся клиентской базы она извлекает денег столько, что это позволяет ей с лихвой покрывать ущерб от ухода кого-то из клиентов.
Time to sell out. P / S у AppLovin по меркам технологических компаний не очень высокий — 5,74. Рыночная капитализация у нее немаленькая, But for a large fund, it is feasible – $16.44 billion. It seems to me, There may be a buyer for the company, taking into account all of the above: it is a promising startup, that you can buy on the cheap, We've seen a lot of these deals lately.
Also, given the strongest drop in stocks since the IPO, I wouldn't be surprised, If only an activist appeared among its shareholders, which would require just the sale of the company. Or, may be, dividing it into two parts – "gaming" and "corporate": maybe, Individually, different issuers will grow more vigorously.
What can get in the way
"What is the situation with money??» There is a flood of startups in the U.S. right now, And for the company, this can have negative consequences: less demand for AppLovin solutions.
owe a lot. The company has a very large debt burden of $4.154 billion, of which only 785.117 million need to be closed during the year. The money at her disposal is enough to pay off urgent debts: 1,413 billion on accounts plus 684.461 million counterparty debts.
In general, the company has a lot of debts, And in the year of the rise in the cost of loans, this will scare away investors. In addition, the company is unprofitable, which makes her bankruptcy not such an improbable prospect.
Volatility Guaranteed. The company's business has not yet paid for itself, So its shares will definitely shake.
What's the bottom line?
Shares can be taken now by 43,75 $. And then there are the following options:
- wait for the price 53 $. Think, we will reach this level in the next 15 Months;
- wait 65 $. Here it is better to focus on 3 years of waiting;
- hope for the best and wait for the shares to return to the IPO price — 80 $. Here it is better to rely on 6 years of waiting;
- keep shares in sorrow and joy next 15 years.
Due to the unprofitability of AppLovin, its shares will storm. So don't touch them, if you are not ready to tolerate volatility.
