Mobile marketing platform AppLovin set for $2-billion IPO

After a busy 2020, the IPO market continues to witness hectic activity this year, led by the technology sector. One of the closely followed events is the upcoming IPO of AppLovin Corporation, a mobile app and gaming technology company headquartered in Palo Alto.

Though the tech firm has not announced the date, it is expected to go public in the first half itself. Earlier, in a statement submitted to the Securities and Exchange Commission, the company sought to have its common stock listed on the Nasdaq stock exchange under the symbol APP. The estimated offer price would be between $75 and $85. The company expects to raise a little more than $2 billion by offering about 25 million shares, which would value it around $30 billion. The proceeds will be used for general corporate purposes and repaying debt.

Investing

An underwriters’ group led by Morgan Stanley (NYSE: MS) is expected to broker the long-anticipated IPO. It looks like an attractive investment opportunity, given the fair value and the company’s impressive financial performance last year, though the bottom line slipped to a loss.

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In fiscal 2020, AppLovin generated total revenues of $1.45 billion, which represents a combined annual growth rate of 76% over the past four years. The company swung to a loss of $0.58 per share from last year’s $0.36-per share profit. The weakness can be attributed to higher R&D spend and investments in the business. It ended the year with more than 410 million daily active users. Meanwhile, the management said it has no plan to pay dividends in the near future.

App Analytics

Established in 2012, AppLovin provides software solutions to mobile application developers, designed to automate and optimize marketing/monetization of the applications. The platform is estimated to have driven more than six billion installs for app developers so far. The primary challenge facing mobile/gaming app developers currently is the presence of too many players in the field.

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Read management/analysts comments on earnings reports

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The management expects the mobile app ecosystem to offer a market opportunity worth $283 billion by 2024. AppLovin has been busy enhancing its technological capabilities to tap that opportunity — mainly through partnerships and acquisitions, such as the buyout of MAX Advertising and SafeDK Mobile Ltd. The focus of the growth strategy is market share expansion both in the domestic market and internationally.

Challenges

Competition will continue to be a major challenge for the company, given the sharp increase in the number of mobile technology providers. In order to get an edge over rivals like DraftKings (NASDAQ: DKNG) and Roblox (NYSE: RBLX), AppLovin needs stronger partnerships and long-term customer engagement. While continued investment is crucial for meeting the growth goals, it will have a negative impact on margins.