AppLovin is a closely watched mobile advertising and AI-related growth story, raising questions about how much further mobile ad gains can be achieved. Morgan Stanley reiterated an Overweight rating and set a $720 price target, with a $1,100 bull case tied to continued improvement in a key operating metric. The metric is conversion rate, measuring how often ads lead to installs or other desired actions. Morgan Stanley estimates that about 99% of AppLovin ads still do not convert, but frames this as room for optimization. The firm estimates conversion rate increased from 1.0% to 1.3% over 18 months, while noting AppLovin trails market leaders like Meta on a comparable true conversion-rate basis. AppLovin reported strong financial results and issued guidance supporting continued momentum.
"Morgan Stanley says the answer may come down to a hidden metric inside AppLovin's ( APP) advertising engine. In a Morgan Stanley note given to TheStreet, analyst Matthew Cost and team reiterated an Overweight rating on AppLovin and a $720 price target. That target sits well above AppLovin's May 22 closing price of $481.68. The firm also laid out a $1,100 bull case if one key operating metric keeps improving."
"Morgan Stanley's bull case centers on conversion rates, or how often an ad shown through AppLovin leads to an install or another desired consumer action. The firm says about 99% of AppLovin's ads still do not convert. That sounds like a weakness at first glance, but Morgan Stanley frames it as the central reason AppLovin may still have more room to grow."
"Morgan Stanley estimates AppLovin's conversion rate has risen from 1.0% to 1.3% over the past 18 months. The firm said AppLovin still trails market leaders such as Meta by a wide margin on a comparable "true" conversion-rate basis. That performance gives Morgan Stanley confidence that AppLovin's ad technology is already working. The bigger issue is whether the company can keep improving the efficiency of that technology."
Read at Miami Herald
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