Shares of app discovery and monetization company AppLovin (APP -2.07%) jumped 15.9% in March, according to data provided by S&P Global Market Intelligence. There doesn't appear to be a single catalyst for the upward move. But some developments can be viewed in a positive light, and general sentiment is rising for AppLovin stock.
For example, early in the month, Adjust -- a company owned by AppLovin -- announced a new capability for apps in Alphabet's Google Play store. Developers can now measure campaigns across platforms, including PCs. Adjust says this technology is "first-of-its-kind" and demonstrates how AppLovin is pushing the envelope for its customers.
I'm not saying this news from Adjust was the reason AppLovin stock was up. I'm saying that investors are encouraged by AppLovin's growth in recent quarters. And this is just another excuse for already encouraged investors to find more reasons for optimism.
Indeed, AppLovin reported financial results for 2023 in February, and the report was a big source of recent optimism. The company focuses on its app software business, which saw 76% year-over-year revenue growth this past year. And growth with this high-margin revenue led to $357 million in full-year net income, a rare level of profitability for a high-growth tech company.
Putting profits to use in March
As AppLovin's software business has surged, so too have the company's profits, improving its overall financial position. The company had over $500 million in cash and cash equivalents at the end of the year and generated over $1 billion in free cash flow in 2023. Management used this strong position to help shareholders in March.
It turns out that investment firm KKR owned nearly 20 million shares of AppLovin and decided to sell. The announcement was made on Feb. 29. This many shares flooding the market could have adversely affected the stock price. However, with KKR's sale, AppLovin's management decided to repurchase $570 million of the shares, mitigating the negative impact.
It's a continuation of what AppLovin did over the past year. In 2023, management repurchased over 54 million shares, reducing its share count by 10%.
What's next for AppLovin?
AppLovin is clearly on a roll with its software for mobile app developers. And it's expecting nearly 35% top-line growth in the upcoming first quarter of 2024, which is good.
As the company solidifies its position in the mobile app ecosystem, AppLovin is broadening its reach to similar markets. For example, it owns a connected TV (CTV) advertising company called Wurl. And in March, Wurl launched a new product that ensures ads match the context of the CTV programming.
CTV is a hot growth market, and this represents just one way that AppLovin can sustain revenue growth in the coming years. If things keep going as they are now, March won't be the last good month for AppLovin stock.
