What Happened?

Shares of mobile app advertising platform AppLovin (NASDAQ: APP) fell 15.9% in the morning session after the company wasn't added to the S&P 500 Index. On Friday, December 6, 2024, markets speculated that AppLovin was a strong contender to join the Index, meeting criteria such as a market value of at least $18 billion and GAAP profitability over the past four quarters. Following the official announcement of the new list of stocks to be added to the Index, APP's omission might force investors to adjust their expectations, at least for now.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy AppLovin? Access our full analysis report here, it’s free.

What The Market Is Telling Us

AppLovin’s shares are very volatile and have had 28 moves greater than 5% over the last year. But moves this big are rare even for AppLovin and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was about a month ago when the stock gained 51.7% on the news that the company reported a classic "beat and raise" quarter as efforts to optimize its AI-powered advertising platform seem to be yielding results. AppLovin beat analysts' revenue, EBITDA, and EPS expectations this quarter. 

Looking ahead, Q4 guidance was also very encouraging, with revenue and EBITDA guidance coming in ahead and the latter well ahead. In addition, the company reiterated the long-term guidance of sustaining 20-30% annual growth, showing management's strong conviction in the growth strategy. Notably, AppLovin announced plans to diversify beyond the gaming audience by expanding into new verticals such as e-commerce. 

Zooming out, we think this was a great quarter amid potentially lower expectations, given the company's uneven performance in the last few quarters.

AppLovin is up 791% since the beginning of the year, but at $345.36 per share, it is still trading 14% below its 52-week high of $401.50 from December 2024. Investors who bought $1,000 worth of AppLovin’s shares at the IPO in April 2021 would now be looking at an investment worth $5,301.

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