Disappointment reigned for AppLovin (NASDAQ:APP) earlier this week when it became clear that it would not be joining the S&P 500.
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Inclusion in the S&P 500 is more than just a mere status symbol. Not only does it bring additional exposure to the company, but investment funds that track the S&P 500 will subsequently purchase shares of any new arrival.
Though many analysts had been expecting AppLovin to get the call, S&P Global, which manages the index, elected not to rebalance this quarter – leaving APP out in the cold. The share price dropped around 8% in the first day trading after the news broke.
This was a bit of a change of pace for APP, which has gained roughly 400% during the trailing twelve months. The company, which helps mobile app developers publish and market their apps, delivered a strong earnings report in early May with revenues surging 40% year-over-year to $1.48 billion.
One top investor known by the pseudonym Stone Fox Capital is choosing to focus on the company’s strong fundamentals, and believes the exclusion is no more than a minor bump in the road.
“The key investor takeaway is that the S&P 500 snub is just a temporary setback,” posits the 5-star investor, who is among the top 4% of TipRanks’ stock pros.
Things are going swimmingly for the company explains Stone Fox, noting that APP’s advertising platform enjoyed especially strong revenue growth of 71%, reaching $1.16 billion for the quarter. The investor points to APP’s “near perfect” margins, while also predicting that the company is on pace for $2 billion in annual adjusted EBITDA.
“Fundamentals remain strong with robust profitability and rapid revenue growth, especially in AI-driven advertising,” adds Stone Fox.
The investor does offer a bit of caution, noting that the company’s overall revenue guidance for Q2 2025 does not represent much growth year-over-year. Though the market might be disappointed from its Q2 results, plenty of long-term potential remains, sums up the investor.
“AppLovin has a big opportunity ahead, and the stock should ultimately get added to the S&P 500 in the future,” concludes Stone Fox Capital, who rates APP a Buy. (To watch Stone Fox Capital’s track record, click here)
Wall Street tends to agree with the investor. With 16 Buy and 3 Hold ratings, APP can boast a Strong Buy consensus rating. Its 12-month average price target of $503.29 has an upside north of 30%. (See APP stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.