Everyone Else Is Panning for Gold Like It’s 1849… AppLovin Is Up 1,000% Selling the Shovels

The California Gold Rush was a crazy time. Thousands of hopefuls packed up their lives, trekked across the country, and spent their days knee-deep in freezing water, hoping to strike it rich. Most of them ended up broke, exhausted, and very much not rich. 

But you know who made a killing? The guys selling the shovels. Legend has it that some enterprising dude bought shovels for $2 on the East Coast, hauled them to California, and flipped them for $50 to desperate miners who were convinced they were one scoop away from changing their lives. The lesson here is that real money isn’t in finding gold… it’s in selling the tools to people who think they’re about to find gold.

Fast forward to today, and the Gold Rush is still alive. It just looks a little different. No, I’m not talking about Bitcoin. The new gold is media, and the digital ad companies are the ones selling the shovels. Which brings us to AppLovin, the Palo Alto-based ad-tech company that’s been striking it rich.

(Source: Sopa Images)

At the start of 2024, AppLovin was trading at $38 per share, with investors questioning whether it had a viable future (kind of like what my dad thought when I dropped out of college). Well, today it’s worth $458 per share, with a market cap of over $153 billion (so good that even Palantir investors are jealous). The driving force behind this rise has been… Ads. More specifically, AppLovin’s AI-powered AXON ad software, which helps companies serve hyper-relevant ads (yes, the reason you looked up hiking boots once and now get nonstop ads for expensive backpacks). This ad machine has been so effective that AppLovin’s revenue skyrocketed 43% year-over-year to $1.37 billion in Q4, completely obliterating expectations. On top of that, net income tripled to $599 million, giving the company a 44% profit margin.

Wall Street analysts are foaming at the mouth over AppLovin’s performance. Following its earnings beat, at least nine firms hiked their price targets… Oppenheimer raised theirs from $380 to $560, while Wedbush took theirs from $545 to $620. And get this… not a single analyst covering the stock has a sell rating on it. In fact, 77% of them rate it as a Buy or Outperform. That kind of universal bullishness is rare (even Apple has a few bears still using androids), and it speaks volumes about how dominant AppLovin has become.

What makes AppLovin so unstoppable is that it understands a fundamental truth about today’s internet economy… The media runs on ads. Every time you scroll TikTok, binge a Netflix series, or read yet another article about how to optimize your morning routine, someone is paying to put an ad in your face. But instead of fighting in the trenches for attention like media companies, AppLovin is the one selling the weapons to all sides. It doesn’t matter whether TikTok or Instagram wins the battle for eyeballs… AppLovin wins either way.

The company isn’t slowing down, either. It’s aggressively expanding beyond mobile ads into fintech, insurance, and e-commerce advertising. To keep things simple and focus on its ad-tech empire, AppLovin is selling off its mobile gaming division for $900 million. The company is pocketing $500 million in cash from a private buyer, plus a minority stake in the new combined company. That move makes sense… While gaming revenue can be wildly unpredictable, advertising is as close to a cash-printing machine as you can get (that and selling shovels in California when Zachary Taylor was our President).

With all this momentum, the big question is whether it’s too late to jump in. AppLovin is no longer a cheap stock… it’s trading at over 30 times sales, as opposed to Amazon which sits at 3.5 times sales. But with its accelerating growth, widening profit margins, and continued expansion into new ad markets, it might still have plenty of upside left.

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Stock.News has positions in Apple, Amazon, and Netflix.