APP

We rate AppLovin Corp (APP) as a Hold with a composite score of 53.7/100 at a current price of $390.51. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (80th percentile) and momentum (62th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (22th percentile) and stability (25th percentile) tempers our overall conviction. We assign a Wide Moat rating (79/100), Very High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

AppLovin Corp holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 53.7/100 places it at rank #1444 in our full 7,333-stock universe. As a mega-cap company with a $243.0B market capitalization, AppLovin Corp benefits from significant scale, distribution networks, and brand recognition that smaller competitors cannot easily replicate.

The near-term outlook is constructive, with revenue growing at 30% and momentum in the 62th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 22th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 84% (+24.0pp vs sector) narrow to operating margins of 61% (+57.0pp vs sector) and net margins of 49.9%, yielding a gross-to-net conversion rate of 60%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $390.51, AppLovin Corp is trading near fair value based on current fundamentals. Our value factor score of 49/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 53.1x (a 124% premium to the sector median of 23.7x), EV/EBITDA of 44.9x (at a premium), P/B of 66.3x, P/S of 26.5x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Very High uncertainty rating to AppLovin Corp. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 2.16), significant leverage (165% debt-to-equity), below-average price stability (25th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.16); significant leverage (165% debt-to-equity); below-average price stability (25th percentile); elevated valuation multiple (P/E 53.1x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 25th percentile and quality factor at the 80th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 84% provide a buffer against cost pressures; large-cap scale ($243.0B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate AppLovin Corp's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 124.9%, and the balance sheet is managed within acceptable parameters (D/E: 165%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; AppLovin Corp falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, AppLovin Corp receives a Hold rating with a composite score of 53.7/100 (rank #1444 of 7,333). Our quantitative framework assigns a Wide Moat (79/100, trend: stable), Very High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 48/100.

Our analysis supports a neutral stance on AppLovin Corp. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.