To The Moon

$AppLovin Corporation(APP)$ stock was up 4.08% on Friday (28 Mar) but at time of this writing, the 24-hours trading saw APP drop by more than 5%.

So can this tech stock really have room for more upside since it has shown that it can rise after steep drop? So what could be the ingredients to help it to rise again.

If we looked at the in AppLovin CEO comments that their business is technical and it is often hard for some who does not understand their technology to understand and figure out what APP is building, which is the world's best advertising AI model.

So he think that investors would need a simple narrative that APP is violating policies in order to comprehend their success. This complexity leaves room for short reports to stir fear and doubt.

The CEO have urged investors to dig deeper. Foroughi's rebuttal highlighted the company's e-commerce strength, competitive advantages and use of industry-standard practices. AppLovin's success is rooted in sophisticated technology and operational rigor, not opaque or unethical practices.

In this article I would like to share what I have been looking up for APP business model and see if it is sustainable.

AppLovin's (APP) Business Model

AppLovin's (APP) business model revolves around two core segments: a Software Platform for mobile app monetization and advertising, and an Apps segment comprising owned-and-operated mobile games.

Here are the breakdown of the sustainability:

Strengths

Growing Market: The global mobile app market is expanding, driving demand for ad tech and monetization tools. AppLovin’s Software Platform, powered by its AI-driven AXON engine, positions it to capitalize on this growth.

Diversification: Revenue streams are split between high-margin software services (ad tech) and app-based income (in-app purchases/ads), reducing reliance on a single segment.

Technology Edge: AXON’s machine learning optimizes ad targeting and spend efficiency, critical in a post-privacy (e.g., Apple’s ATT) landscape. This innovation helps mitigate data limitations.

First-Party Data: Ownership of popular gaming apps provides valuable first-party data, enhancing ad targeting without violating privacy norms.

Risks and Challenges

Privacy Regulations: iOS ATT and global privacy laws (e.g., GDPR) disrupt traditional ad targeting. AppLovin’s pivot to privacy-compliant solutions is promising but untested long-term.

Competition: Competing with giants like Google, Meta, and Unity requires continuous innovation. Specialization in mobile gaming is a niche advantage but may limit broader market reach.

Debt Burden: Acquisitions have led to significant leverage, posing financial risk if growth slows or interest rates rise.

App Segment Volatility: The hit-driven nature of casual gaming makes revenue from owned apps unpredictable. Success hinges on consistently producing popular titles.

Sustainability Outlook

AppLovin’s model is potentially sustainable if:

1. The Software Platform maintains growth through AXON’s effectiveness and client retention.

2. Privacy-compliant ad tech adapts to regulatory shifts.

3. Debt is managed prudently, and profitability in the Apps segment stabilizes.

However, risks like intense competition, regulatory changes, and gaming market volatility require vigilant management. The company’s strategic focus on high-margin software and AI innovation is a strong counterbalance, but execution remains critical.

AppLovin (APP) Past EPS Performance Have Been Encouraging

In the earnings call for AppLovin's fourth quarter and full-year results ending 31 December 2024, the company provided optimistic guidance for the future, highlighting a significant transition in their business model.

AppLovin achieved a 44% increase in total revenue year-over-year, reaching $1.37 billion, and a 78% increase in adjusted EBITDA to $848 million, with a 62% adjusted EBITDA margin. For the first quarter of 2025, AppLovin expects the Advertising business to generate between $1.030 billion and $1.050 billion in revenue, with adjusted EBITDA ranging from $805 million to $825 million, targeting a margin of 78% to 79%.

AppLovin anticipates Apps revenue to be between $325 million and $335 million, with adjusted EBITDA between $50 million and $60 million. A key focus will be on expanding their ecommerce category and rolling out automated tools to enhance accessibility and scale. AppLovin is poised to divest its Apps business, aiming to close the transaction by Q2 2025, signaling a strategic shift towards concentrating fully on their advertising platform.

Technical Analysis - Exponential Moving Average (Short Term)

If we looked at the technical, APP have lose the daily uptrend last week when it start to have a massive dip on Thursday before recovering on Friday by a modest 4%. The only consolation is that APP is still trading above the 200-day period.

But do take note that there will be more sell off comes Monday (31 March) as the investors are in extreme fear of what would turned out on 02 April, as seen in RSI, it is now moving towards the oversold, so I expect momentum to be very weak.

What we can do is to wait for a reversal signal when momentum start to pick up again from oversold region.

Technical Analysis - Exponential Moving Average (Long Term)

On the weekly chart, we are seeing that the bear are now in control after we saw a massive dip last week, the recovery of 4% did not help to bring APP out of the level (12-EMA, on the weekly.

We can see that now weekly momentum is poised to experience further massive dip as the RSI is in an indecisive level, and we could expect APP to lose the 50-day period on the weekly, which mean the bear would be in control for quite a long time, unless there is a surprise coming on 02 April.

For now, it is advisable to watch the overall market sentiment as investors are preparing to offload their shares.

Summary

AppLovin’s business model shows promise but faces significant headwinds. Sustainability hinges on continued tech leadership, debt management, and navigating privacy challenges.

If we looked at how APP have performed in the short term and long term in terms of technical, we need to be aware also of the quarterly performance in the Software Platform and debt metrics closely.

Appreciate if you could share your thoughts in the comment section whether you think APP would experience a surprise if 02 April provide a tariffs reversal and market start to experience stronger momentum.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.