AppLovin shares jumped after Evercore ISI initiated coverage with an Outperform rating and an $835 price target, arguing the mobile-advertising platform still has runway after last year’s massive rally.
At a Glance
- Evercore ISI starts AppLovin at Outperform, price target $835
- The stock has already quadrupled since January 2025
- Analyst sees 40% upside from Tuesday’s close
- Why it matters: Investors are debating whether the AI-driven ad engine can keep beating expectations
AppLovin helps mobile-app developers find users and make money from ads. The company’s software uses machine-learning models to place ads inside games and other apps, taking a cut of revenue when consumers watch or click. Revenue from that business surged 45% year-over-year last quarter, helped by new AI tools that lift click-through rates.
Evercore ISI analyst Robert Coolbrith told clients the rally is “nowhere near over.” He values the stock at 35-times 2026 estimated earnings, a premium to ad-tech peers but below high-growth software names. His model assumes revenue compounds at a 30% annual rate through 2027, driven by market-share gains and expansion into connected-TV ads.
“We see AppLovin as the clearest beneficiary of performance-marketing budgets shifting to mobile,” Coolbrith wrote. “The moat around its data set gets stronger with every ad served.”
The endorsement landed a day after AppLovin shares slid 7% in the first week of 2026, part of a broader tech retreat. The stock reversed early losses Wednesday, climbing 11% to $610 in afternoon trading, still 27% below the new target.
Bullish Math
Coolbrith laid out three reasons the $835 figure is achievable within 12 months:
- EBITDA margin rising to 48% by late 2026, up from 42% last quarter
- Free-cash-flow yield topping 6%, supporting buybacks
- Optionality in e-commerce ads could add $400 million in high-margin revenue
His bear case values the shares at $550, assuming a 20% haircut to ad-spend budgets if the economy weakens. Even that floor is 40% above where the stock traded last January, before the AI-fuelled rerating.
AppLovin’s largest customers-mobile-game publishers such as Supercell and Scopely-have kept campaign budgets intact despite fears of recession. Time spent on gaming apps rose 9% globally last quarter, according to data firm App Annie, giving advertisers more inventory to buy.
Risk Checklist
Coolbrith concedes several roadblocks could derail the bull thesis:
| Risk | Potential Impact | Mitigant |
|---|---|---|
| Regulatory scrutiny on data collection | Fines, limited targeting | AppLovin stores most data on-device |
| Apple privacy updates | 15% revenue headwind | Diversification into Android |
| Competition from Unity, Google | Pricing pressure | First-party data advantage |
| Customer concentration | Top 10 apps = 35% revenue | Long-term contracts, volume rebates |
Management guided for $1.2 billion in full-year adjusted EBITDA, implying a 43% margin at the midpoint. If AppLovin hits Coolbrith’s 48% target, incremental profit would equal roughly $150 million, enough to justify the premium multiple, he argues.
Short interest has climbed to 9% of the float, the highest since the 2021 IPO, according to S3 Partners. Bears contend the AI narrative is overblown and that comps will get tougher mid-year. Coolbrith counters that short covering could itself fuel a squeeze if quarterly results beat expectations.
Street Reaction
Three other brokers lifted targets this week:
- JP Morgan raised to $720 from $650
- KeyBanc upped to $800 from $750
- Piper Sandler moved to $780 from $700
Consensus now stands at $745, implying 22% upside. Only Evercore ISI and KeyBanc sit above the $800 level.
AppLovin reports fourth-quarter results February 12. Analysts model revenue of $1.05 billion, up 38% year-over-year, and adjusted earnings per share of $1.84. Guidance for 2026 will be key; Coolbrith expects management to project $4.7 billion in revenue, 10% above consensus.
Key Takeaways
- Evercore ISI joins the chorus of bulls, setting the highest target on the Street at $835
- The call hinges on margin expansion and new revenue streams outside mobile gaming
- Short interest near record levels could accelerate moves in either direction
- Next catalyst is February 12 earnings, where guidance will test the lofty expectations
