AppLovin (NASDAQ:APP) stock has plunged this year and is now hovering near its lowest level since May of last year. Shares have slumped 60% from their all-time high, with the company’s valuation falling from $246 billion to roughly $104 billion. This retreat has coincided with several analysts cutting their price targets.
Analysts Have Pared Back Their AppLovin Stock Targets
Top analysts tracking AppLovin stock have reduced their targets, even while maintaining their bullish views. Matthew Cost, a Morgan Stanley (NYSE:MS) analyst, has slashed his target from $650 to $450, while maintaining his overweight rating.
BTIG’s Clark Lampen reduced his target to $396 from the previous $408, while Evercore’s Robert Coolbrith cut from $630 to $510. Other analysts who have slashed their outlooks for the blue-chip stock are from companies like Needham, Piper Sandler, and Wells Fargo. Insiders have also sold shares in the last few months.
These targets dropped after the company published its financial results, which were lower than expected. Its revenue of almost $2 billion was lower than its guidance and what analysts were expecting. The same happened with its adjusted EBITDA, which came in at $1.5 billion.
The management blamed this weakness to its gaming business, which still accounts for the biggest part of its business. In his statement, the CEO maintained that the company had identified the challenges and already executing.
Despite the challenges, analysts believe that the company’s revenue growth will continue. The average estimate among analysts is that its current’s quarter revenue will be $2.07 billion, up by 47.3% from the same period last year.
For the year, the estimate is that its revenue will jump by 47.8% to $8.1 billion followed by $10.2 billion next year. While its second quarter revenue was weaker than expected, these forecasts are still fairly strong.
AppLovin Stock Has Formed an Island Reversal Pattern
APP stock chart | Source: TradingView
Technicals suggest that the stock may be about to rebound in the near future. That’s because it has formed an island reversal pattern, which happens after an asset consolidates after making a big gap. In this case, the gap happened in August after it released its weak financial results. This pattern often leads to a strong rebound.
The stock has formed a bullish divergence pattern, which happens when the Relative Strength Index (RSI) is making a series of higher highs. Therefore, it is likely that the stock will bounce back, potentially to the psychological level of $400.
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