Should AppLovin shares be in your portfolio before the third quarter?

AppLovin Corporation APP will report its third quarter 2024 results on November 6 after the market close.

Stay up to date on all quarterly releases: See Zacks Earnings calendar.

The Zacks Consensus Estimate for earnings for the quarter is pegged at 95 cents, representing growth of 216.7% from the prior-year quarter. The consensus revenue estimate is $1.13 billion, representing year-over-year growth of 30.8%.

An estimate for the reporting quarter was revised upward in the past 30 days, while there were no southward revisions. Over the same period, the Zacks Consensus Estimate for 2024 earnings has risen 6.7%.

brImage source: Zacks Investment Research

The company has an impressive history of surprising earnings. Earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an earnings surprise averaging 21.1%.

AppLovin Corporation Price EPS Surprise | Quote from AppLovin Corporation

Our proven model predicts no increase in profits for APP this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the likelihood of an earnings beat. But that is not the case here. Use our Earnings ESP filter to discover the best stocks to buy or sell before they're reported.

APP has an Earnings ESP of -4.71% and a Zacks Rank #2.

You can see the complete list of today's Zacks #1 Rank stocks here.

We expect the company's revenue to improve year-over-year in the quarter under review, driven by an increase in software platform and apps revenue. The consensus estimate for software platform revenue is $763.44 million, representing year-over-year growth of 51%. The consensus app revenue figure is $367.72 million, indicating year-over-year growth of 2.2%.

Software Platform's consensus adjusted EBITDA is $559.3 million, representing year-over-year growth of 53.6%. App's adjusted EBITDA is expected to increase 50.8% year-over-year.

APP has seen a massive increase of 299.2% year to date, significantly outpacing the industry increase of 32.7%. This is in line with its competitors in the mobile in-game advertising space, as Alphabet Inc. GOOGL is up 21.2%, and Metaplatforms META is up 58.5% year-to-date.

Image source: Zacks Investment Research

Despite this impressive rally, the stock remains in undervalued territory. Based on 12-month EV to EBITDA, APP trades at 34.11x, well below the industry's 49.45x. If we look at the forecast 12-month price-to-earnings ratio, APP shares are currently trading at 35.92 times forward earnings, which is below the industry's 38.13 times.

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