AppLovin Surges on Citi's Top Pick Endorsement Amid 71% Core Ad Business Growth

AppLovin shares rose 6.5% after Citigroup reaffirmed it as a top pick and maintained a buy rating with a $600 price target, implying 70% upside. The company reported 71% growth in its core advertising business to $1.15 billion in Q1, with adjusted EBITDA jumping 92% to $943.3 million. The stock remains pricey at a price-to-sales ratio of 22, but has high growth potential.

AppLovin Corp (NASDAQ:APP) saw its shares rise 6.5% on July 2, 2025, following Citigroup's reaffirmation of its buy rating and $600 price target. The investment bank expects the mobile technology company to report robust Q2 2025 results, with revenue and adjusted EBITDA landing at the high end of the company's guidance range.

AppLovin's Q1 2025 results were impressive, with a 71% growth in its core advertising business to $1.15 billion and adjusted EBITDA jumping 92% to $943.3 million. The company's gross profit margins remain strong at 77.72%. Citigroup highlights several key areas investors should focus on, including AppLovin's eCommerce advertising initiative, the launch of self-serve tools in Q4 2025, and the impact of app store fee changes on mobile ad spending.

The stock is currently trading at a price-to-sales ratio of 22, which some investors may consider pricey. However, Citigroup's analysts believe AppLovin's high growth potential justifies the valuation. Other analysts have also expressed optimism, with Piper Sandler and Morgan Stanley raising their price targets to $470 and $460, respectively.

In addition to Citigroup's endorsement, Scotiabank initiated coverage on AppLovin with a Sector Outperform rating and a $430 price target, citing the company's strong performance metrics and competitive advantages. The firm noted AppLovin's AXON engine as a significant competitive moat and its resilience to regulatory changes.

Despite the positive outlook, AppLovin faces challenges such as rising competition in demand-side platforms and potential regulatory shifts. However, the company's focus on reinvestment in research and development and marketing, as well as its high gross margin level, positions it well to maintain its competitive edge.

References:
[1] https://www.investing.com/news/analyst-ratings/citi-reiterates-buy-rating-on-applovin-stock-ahead-of-q2-earnings-93CH-4133705
[2] https://www.gurufocus.com/news/2975904/citigroup-c-expected-to-release-earnings-report-with-163-consensus-c-stock-news
[3] https://finviz.com/news/101024/applovin-app-just-got-a-430-price-target-heres-why-wall-street-is-buzzing
[4] https://www.ainvest.com/news/applovin-corporation-poised-monster-annual-returns-2507/