Sign InAppLovin Stock Analysis: Overvalued Amid Legal Challenges and Technical Volatility
Summary
On March 17, 2025, AppLovin Corporation's stock surged by 4.77% despite facing significant overvaluation and a looming class action lawsuit that could impact investor sentiment.
Technical Analysis
AppLovin Corporation (NASDAQ: APP) closed at $306.85 on March 17, 2025, marking a significant increase of 4.77%. The trading volume at 8.85 million shares notably exceeded the average volume of 7.05 million, indicating increased investor interest. However, the RSI14 stands at 37, suggesting the stock is nearing oversold territory, but not at a crucial buy level yet. The 50-day and 200-day moving averages, at $353.35 and $207.33 respectively, reveal that the stock is sandwiched between a bearish short-term trend and a bullish long-term trend reversal. The MACD indicates ongoing bearish momentum with a negative value of -47.23. The stock faces immediate resistance at $320.49, while support is apparent around $270.48.
Fundamental Analysis
Fundamentally, AppLovin is trading at a P/E ratio of 67.59 with a TTM EPS of $4.54, indicating a high valuation relative to its earnings. This high P/E suggests investor expectations of future growth. However, the intrinsic value based on discounted cash flow (DCF) is calculated at $85.54, far below the current market price, suggesting significant overvaluation. Analyst price targets indicate substantial potential downside, with a consensus target of $283 and a median of $205, contrasting sharply with current levels and the 52-week high of $525.15.
The company faces a class action lawsuit that alleges securities fraud, which can contribute to volatility and potentially damage investor sentiment and stock price performance.
Predictions for the Next Trading Day and Upcoming Week
Considering the technical indicators and recent volume spikes, short-term volatility is expected. The class action lawsuit news is likely to weigh on the stock, potentially creating downward pressure. It is plausible that APP will test the support level of $270.48 in the coming days. For the upcoming week, assuming no new positive catalysts emerge, the stock may trend within the range of $270.48 to $320.49.
Long-Term Investment Potential
AppLovin operates in a high-growth industry, providing a software platform for advertisers, which is promising in a digital-centric economy. However, the current overvaluation and potential legal challenges create a cautious outlook for long-term investors. The discrepancy between the current share price and its DCF value, coupled with severe legal challenges, suggests that investor confidence may be shaken in the longer term.
Overall Evaluation
Given the high market valuation, overvaluation relative to intrinsic value, upcoming legal challenges, and the prevailing technical indicators, AppLovin Corporation is evaluated as a 'Hold' candidate. This reflects the stock's potential to experience continued volatility and downside risks contrasted against the hopeful long-term growth prospects of its industry.
