Axon Ad Engine Roars And Short Seller Noise Fades But I'm Still Not Buying AppLovin Yet (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• AppLovin's AI-driven ad platform has strong long-term growth drivers, with management guiding for a minimum of high-teens annual revenue growth.
• An outcome-focused revenue model positions APP well to consistently keep increasing gross margins. And there are powerful operating leverage benefits to drive EBIT margin expansion to 70% in 3 years.
• I really don't like how management is divesting their apps/gaming business at throwaway valuations. This decision seems hurried, which could signal risk of poor moves in future M&As.
• The market is calling bluff on the short seller attacks as management has dismissed the shorts' allegations and hired a top lawyer to defend the firm.
• APP is trading at a lower than usual premium vs its competition, which I think suggests undervaluation especially given its superior growth rate in revenues and earnings. But the relative technicals vs SPX500 suggest no sustained upside breakout just yet.

Read the full article here.