Our target price on AppLovin is $600 per share. This is akin to ~60x  2026E price-to-FCF. Our target multiple is at a premium to the average of other digital advertising peers and a premium to the S&P 500 NTM FCF multiple, which we believe is justified given the firm's strong growth prospects and FCF generation.

This stock is High Risk based upon our quantitative model, but assigning a High Risk rating is not supported by other qualitative factors such as: 1) AppLovin’s diverse portfolio of games; 2) very little net debt; and 3) an industry-leading tech stack. So, a High Risk rating has not been applied.

AppLovin may fail to reach our target price under a few scenarios. First, the firm’s game titles may not succeed in the marketplace. Casual mobile games are typically not evergreen titles, and consumers can be fickle. Second, if customers' returns on ad spend on the company’s platform deteriorates, there may be downside to our forecast and target price. Third, we suspect AppLovin will pursue additional M&A. If the firm overpays for assets – or fails to successfully integrate assets into its portfolio – the shares may underperform.