AppLovin’s stock has been parabolic ever since 2023. It is now one of Wall Street’s best performing companies. APP stock surged this week to $520, a stunning increase considering it traded at $9.75 back in 2023. The market value of APP has risen to more than $150 billion as a result. The Applovin share price could crash in the near future, according to this article.
AppLovin is growing in popularity
Applovin continued to perform well during the fourth quarter of its record-breaking year, according to results released last week.
The company’s revenues in Q4 soared to $1.3billion, an increase of 44%. The company’s annual revenues increased by 43% to $4.7 Billion.
This revenue increase was primarily due to its advertising division, which saw a 73% jump in revenue. It is notable that this is relatively new business in the ecosystem. The revenue of its original app-development business fell by 1%, to $373 millions.
AppLovin is now a profitable business, and this trend may continue for the next few months. In the past quarter, its net profit increased by 248% to close to $600,000,000. Its annual profit grew by 343% to reach $1.57 Billion, an increase of approximately 46%. This means its profit margin will be around 46%.
AppLovin will continue to grow in popularity as demand increases. Spotify, OpenTable Hotels.com and Groupon are some of the top clients.
There are still two major reasons for the AppLovin share price to suffer a sharp reversal over the next few weeks.
The valuation of APP is stretched
AppLovin’s stock is likely to crash in the near future because its value is stretched.
AppLovin reported $4.7 billion of revenue in 2024. Analysts expect that number to rise to $5.84 in 2025, then $7 billion by 2026. A company with a value of over $150 billion would be hard-pressed to generate a $7 billion revenue, despite its double-digit rate of growth.
This means that the company’s forward price to sales ratio is above 21. This is an important valuation measure, as taking the company private and assuming that there will be no growth would take over 21 years for the money to be recovered.
AppLovin’s forward PE ratio is 74. This is higher than S&P500 average, which stands at 22. Microsoft, NVIDIA and Meta are popular companies with a lower valuation.
Wyckoff’s theory suggests a crash in AppLovin shares
According to the Wyckoff Theory which has been around for over 95 years, AppLovin’s stock will soon crash as investors begin to profit.
This chart shows the APP price remained at an accumulation level in 2022-2023. This is followed by a markup. In 2024, the Fear of Missing Out intensified. FOMO can be characterized by a bullish buzz for an asset. This includes the ongoing calls to include it in the Magnificent 8.
AppLovin’s stock will reach the phase of distribution, then the stage of markdown, when assets are crashing. Investors will panic if there is a crash, and the stock price will drop over time.
Other companies have done this before. Some of them were Celsius Holdings, Super Micro Computer and others. These stocks all surged in the year 2023, but then fell in 2024.
AppLovin’s stock is surging: prepare for a mean reversion by 2025
The post AppLovin Stock forecast: Why APP stocks may crash soon will be updated as new information becomes available.
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