AppLovin Posts Mixed Q2; Focus Shifts To Non-Gaming Business

Shares of AppLovin Corp (NASDAQ: APP ) tanked in early trading on Thursday after the company reported second-quarter results.

Here are the key analyst takeaways: Needham analyst Bernie McTernan reiterated a Buy rating, while cutting the price target from $700 to $500.

BTIG analyst Clark Lampen maintained a Buy rating, while slashing the price target from $640 to $574.

Check out other analyst stock ratings.

Needham: AppLovinindicated thatitssecond-quarter results were slightly below the low end of its guidance range due to the timing of a model uplift, McTernan said in a note.

While the company typically implements model improvements multiple times in a quarter to improve targeting and ROAS, there was no "material model lift" in the second quarter and one was implemented at the beginning of the third quarter, he noted.

As a result, management guided to sequential revenue growth of 7.6% in the third quarter, higher than their typical mid-single-digit growth guide, the analyst stated. "Importantly, this guidance only reflects the model uplift that is already deployed, which is more conservative than the typical guidance methodology," he further wrote.

BTIG: AppLovin reported its second-quarter revenue in-line with its guidance, while missing EBITDA expectations, Lampen said.

Management commentary suggested "a lack of meaningful intra-quarter gaming model and conversion improvement," which is likely to have driven some take rate compression, he added.

Management’s third-quarter guidance implies a re-acceleration in revenues to $2.055-$2.085 billion in the third quarter, bracketing consensus of $2.083 billion and reflecting "a more material model lift," the analyst stated.

With AppLovin indicating that it faced a gaming blip, rather than a market-wide deceleration, the focus is likely to "shift back toward the non-gaming business and the ongoing ramp in new customer count," he further wrote. "A pivot toward partnerships will allow AppLovin to address more sophisticated, medium-sized advertisers," which could drive more balanced growth between customer count and spend as the non-gaming model matures, Lampen said.

APP Price Action: Shares of AppLovin had declined by 19.67% to $335.64 at the time of publication on Thursday.

Read Also: AppLovin CEO Says Q2 Miss 'Came Down to Timing' as Company Guides for Strong Q3