Citibank is bullish on AppLovin (APP.US): Despite facing competition from Unity (U.US), its long-term growth potential remains "off the charts".

Citi is bullish on AppLovin (APP.US): May Face Unity (U.US) Competition "Pressure", But Long-Term Growth Potential Still "Off the Charts" According to Citi Research, mobile marketing company AppLovin (APP.US) may face competition pressure from Unity Software (U.US) in the next few quarters, but its long-term growth prospects remain strong. Citi reiterates its "buy" rating on AppLovin stock and raises its target price to $600 from $460. Citi analyst Jason Bazinet and his team said in an investor note: "As we move into Q1 2025, we see a potential risk: Unity launching new advertising technology solutions in its growth business segment. However, our analysis suggests that if Unity's growth business starts to perform better, the potential revenue headwind may be smaller, about $40mn per quarter." AppLovin's stock soared more than 25% after it reported its fourth-quarter financial results last week. Bazinet noted: "Perhaps the most exciting aspect of AppLovin's growth prospects is its long-term opportunity. To assess this, we conducted two sets of analysis. First, we compared AppLovin's ARPDAU to that of various social media platforms. The analysis showed that AppLovin's revenue could grow 2x to 14x from its current level." He added: "Second, we assessed how AppLovin's revenue would grow if the conversion rate of purchased impressions increased from 1% to 5%. This analysis also showed that AppLovin's revenue could grow 14x from its current level." Unity is expected to report its fourth-quarter 2024 financial results before the market opens on Thursday. The consensus expects its adjusted EPS to be $0.16 and revenue to be $433.47mn.