What happened
AppLovin (APP 6.66%) shares beat the market this week, rising over 20% through Thursday trading compared to a 1.3% decline in the wider market, according to data provided by S&P Global Market Intelligence. The spike added to significant short-term returns for investors in the app tech platform. Shares are up over 50% since the start of 2023.
The latest rally was sparked by a fourth-quarter earnings update that showed stability in AppLovin's business.
So what
Sales for Q4 fell 11% to $702 million as many of its business lines remained pressured by slowing advertising spending and weaker in-game spending. Yet that result edged past the outlook management had issued. AppLovin also met expectations around profits, with losses clocking in at $80 million, or 11% of sales. The company generated positive cash flow in the period.
Yet Wall Street was even happier to hear that the mobile ad market isn't collapsing right now. Instead, AppLovin says it sees stability in the industry that will allow it to continue posting solid growth into early 2023.
Now what
Specifically, AppLovin is projecting sales between $685 million and $705 million for the first quarter, which is higher than the $680 million that most Wall Street pros had predicted. That forecast translates into double-digit sales growth as well. The company's positive cash flow is also giving executives plenty of flexibility to consider strategic acquisitions, investments in the business, and more aggressive stock buybacks.
Overall, while sales declined in late 2022 and the company posted net losses, operating trends suggest that both of these metrics will improve into 2023. This good news had investors feeling more optimistic about AppLovin's business, which is highly dependent on the app economy. At least into early 2023, that ecosystem seems healthy and stable.
