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Shares of AppLovin closed more than 20% higher Thursday after the company reported a fourth-quarter earnings beat, causing many analysts to lift their price targets as the stock crossed the $500 mark for the first time ever.
The ad tech company said on its earnings call it was divesting its apps business as the company aims to move into other verticals for its artificial intelligence-powered AXON advertising software, such as fintech, insurance and automotive.
Analysts at Wolfe praised the sale of the apps segment, saying the company’s financials “gets cleaner at a time when its growth outlook gets better,” while raising their price target to $550 from $490.
“We believe the sales of its game development/publishing will make it easier for investors to justify APP’s expanding valuation multiple,” wrote Oppenheimer analysts after bringing their own target up to $560 from $380.
Wall Street is bullish on AppLovin, with 77% of the analysts covering the company rating it a buy or outperform, according to a CNBC analysis. There are no sell ratings.
AppLovin reported earnings per share of $1.73 on $1.37 billion in revenue for the final quarter, outperforming the expectations of analysts’ polled by LSEG, who expected earnings of $1.24 per share on $1.26 billion in revenue.
Net income in the quarter more than tripled to $599.2 million, or $1.73 per share, from $172.3 million, or 51 cents per share, a year earlier, the company said in a statement. Revenue jumped 43% from $953.3 million a year earlier, fueled by improvements and expansions to new categories for its AXON models.
AppLovin was the most successful tech stock in the U.S. last year, soaring more than 700% and outperforming even the biggest names in the AI space. Over the past 12 months, its gains are up more than 900%, neck-and-neck with Palantir as the best performer year to date.
It expects first-quarter revenue of between $1.36 billion and $1.39 billion, exceeding the $1.32 billion average analyst estimate, according to LSEG.
More than $1 billion of that will come from its advertising segment, as the company said it is “still in the early stages” of bolstering its AI models further.
— Additional reporting by CNBC’s Michael Bloom.