AppLovin (NASDAQ:APP) faces high expectations this earnings season

Online advertising is a big revenue generator. And that makes advertising technology company AppLovin (APP) a particularly attractive company for some investors. However, investor enthusiasm is putting the company under pressure when it comes to upcoming earnings.

APP stock is up nearly 300% this year. Thanks to this massive rise, AppLovin is the best-performing stock among U.S. tech companies, at least among those with a market cap of $5 billion or more. And with its earnings report coming out on November 6th, that means a lot of very real concerns about whether the company can generate profits that justify the huge increase in its stock price.

AppLovin stock's rise began three years ago when it was buoyed by online gaming during the pandemic. AppLovin has capitalized on this by connecting with artificial intelligence (AI), a technology that has allowed it to better target online advertising.

More news about AppLovin

That alone could be reason enough to be interested in AppLovin stock, but another point from analysts at Wells Fargo (WFC) also helps APP stock. Wells Fargo currently has an overweight rating on AppLovin stock and a $200 price target.

Wells Fargo compared AppLovin to Alphabet (GOOGL), noting that AppLovin's presence in mobile gaming is very similar to Alphabet's and its position in general “programmatic advertising.” In fact, the bank noted that AppLovin could expect a compound annual growth rate (CAGR) of 20% to 30% through 2027 due to the sheer size of its “mobile gaming user acquisition market.”

Is AppLovin Stock a Good Buy?

As for Wall Street, analysts have a Moderate Buy consensus rating for APP stock based on 12 Buys, four Holds, and one Sell over the past three months, as shown in the chart below. After a 306.85% increase in the share price over the past year, the average APP price target of $159.56 per share implies a 0.99% downside risk.

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