Mobile advertising technology company AppLovin (NASDAQ: APP) will officially be added to the S&P 500 index before the U.S. market opens on September 22. Since January 2023, the company’s stock price has surged an impressive 4,560%, dwarfing Palantir’s 2,280% return over the same period.
Wall Street remains optimistic about AppLovin’s prospects. The average 12-month price target among 29 analysts stands at $514 per share, implying a 5% upside from its current price of $490. This target is expected to be revised further upward following its inclusion in the S&P 500.
Historical data show that stocks tend to deliver excess returns after being added to the S&P 500. Over the past decade, 159 out of the 176 newly added constituents gained an average of 13.9% in the 12 months following inclusion. This trend is driven by two main factors: first, index funds must rebalance their portfolios to reflect the new composition, and second, the rigorous selection criteria—including a minimum market cap of $22.7 billion, GAAP profitability in the most recent quarter, and at least 50% of shares available for public trading—provide a credibility boost, significantly increasing market visibility.
AppLovin’s key competitive advantage lies in its AI-powered recommendation engine, Axon. This proprietary technology uses predictive algorithms to precisely match advertiser demand with publisher inventory. Morgan Stanley has praised Axon as a “best-in-class machine learning ad engine.” The company’s strong second-quarter financial results further underscore its growth momentum: revenue increased 77% year-over-year to $1.2 billion, while GAAP earnings per share surged 168% to $2.39.
In addition to its core mobile game advertising business, AppLovin is expanding into e-commerce advertising—a move that could expand its addressable market by more than tenfold. The company plans to launch a self-service advertising platform on an invite-only basis in October, followed by a global rollout next year. CEO Adam Foroughi stated that this platform will “serve as the foundation for our next decade of growth.”
Despite competing against industry giants like Alphabet’s Google, Meta, and Amazon, Wall Street expects AppLovin to maintain an annual earnings growth rate of 54% through 2026. With the company exceeding consensus earnings estimates by an average of 23% over the past six quarters, its current valuation of 70 times earnings appears justified.
