AppLovin Stock Analysis: High Volatility, Legal Issues, and Overvaluation Raise Caution for Investors

Technical Analysis

AppLovin Corporation (NASDAQ: APP) closed on March 11, 2025, at $257.76, experiencing a significant daily change of 8.27% or $19.68. The stock's price ranged from $236 to a high of $261.45 during the day, closely approaching its resistance level at $259.63. The Relative Strength Index (RSI) of 14 indicates that the stock is severely oversold. The 50-day moving average stands at $357.28, and the 200-day moving average at $203.23, suggesting a bearish crossover with the stock trading below both moving averages. Additionally, the MACD over a three-month range is negative at -7.92, reinforcing the bearish outlook in the short to medium term. The Average True Range (ATR) of 13.91 suggests high volatility.

Fundamental Analysis

AppLovin is struggling fundamentally, with a P/E ratio of 60.72, signaling that the stock is expensive compared to industry averages. However, it boasts a market cap of $93.51 billion, indicating its substantial market presence. The discounted cash flow (DCF) calculation suggests an intrinsic value of $72.47, far below the current market price, implying overvaluation. The consensus price target is $260.42, closely aligning with its current trading price, indicating that analysts expect limited immediate upside.

Recent News and Impact

Recent news indicates legal challenges with multiple class action lawsuits filed against AppLovin, which can impact short-term investor sentiment negatively. There is no direct account of the financial implications of these litigations, but they contribute to increased uncertainty and risk around the company's stock.

Short-term and Long-term Predictions

For the next trading day, considering the increase in volume and proximity to resistance, the stock might consolidate or slightly retreat due to potential profit-taking amidst ongoing legal concerns. The upcoming week's movement may exhibit heightened volatility influenced by legal developments and potential market reactions. The long-term outlook remains clouded due to overvaluation concerns and ongoing lawsuits, raising questions about its sustainable growth prospects.

Intrinsic Value and Long-term Potential

AppLovin's intrinsic value calculated via DCF suggests $72.47, considerably lower than the current stock price, hinting at overvaluation. With key revenue-generating avenues and market capitalization, AppLovin has potential, but current legal issues and high valuation multiples limit immediate appeal for long-term investors.

Overall Evaluation

Given the current technical signals, fundamental overvaluation, and negative news flow concerning legal matters, the stock positions itself as a 'Hold.' While short-term trading may capitalize on volatility, long-term investors might consider waiting for legal resolutions and improved valuation metrics before reassessing. The consensus analyst position is a 'Buy,' yet current circumstances necessitate cautious optimism.