AppLovin has emerged as a significant player in the adtech sector, experiencing remarkable growth in recent years. This upward trajectory continued as the company’s stock surged over 50% since August 20, despite an absence of major company announcements or earnings reports. The most notable catalyst for this recent surge was AppLovin’s inclusion in the S&P 500, which led to an 11% rise in stock value following the news, and an additional 5% lift as it prepared for inclusion in the index.
Securing a place in the S&P 500 is not only seen as a badge of approval from S&P Global but also prompts automatic stock purchases by the exchange-traded funds (ETFs) that track the index. However, the addition to the index is just one component of the stock’s recent gains.
AppLovin’s growing market share within the adtech industry is another contributing factor to its ascent. Unlike its competitor, The Trade Desk, which has faced slowed growth and heightened competition, AppLovin stands strong, with analysts highlighting significant market share gains. For instance, AppLovin’s ad product has attracted a larger portion of ad budgets from agencies when compared to other platforms like TikTok.
Expanding beyond its original domain in gaming, AppLovin is diversifying into sectors such as e-commerce and connected television. This strategic expansion appears fruitful, with increased international demand as well. BTIG’s optimistic forecast strengthens this view, with the bank raising its anticipated non-gaming revenue for the fourth quarter due to expected international growth and other strategic initiatives.
While the upward stock movement might seem overextended—especially given its price-to-sales ratio of 39, which exceeds any other stock on the S&P 500 save for Palantir Technologies—its impressive revenue growth and wide profit margins render the current valuation more palatable. Despite a pullback from its peak, caution may be wise given the ad industry’s inherent volatility and fluctuating market valuations. Nonetheless, AppLovin’s rapid growth and strategic positioning suggest a promising future for the company as it continues to carve out its niche in the adtech market.