Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight"><p>AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. </p></div><p>Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. </p><p>We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.</p>

AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.

<ul>
<li>Founded in 2011, <a href="https://www.smartkarma.com/entities/applovin-corp" target="_blank" data-smartkarma-citation="entities:32989:1" rel="noopener">AppLovin Corp (APP US)</a> is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.</li>
<li>The <a href="https://www.cityindex.co.uk/market-analysis/applovin-ipo-background-guide/" target="_blank" rel="noopener">company</a> originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. </li>
<li>AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.</li>
</ul>


Founded in 2011, AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.
The company originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. 
AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.


United States

AppLovin Corporation provides software solutions. The Company offers an end-to-end software that optimizes monetization, and uses machine learning to make data-driven marketing decisions for profitable growth. AppLovin serves clients worldwide.

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AppLovin (APP US)

AppLovin IPO Valuation Analysis

Our base case valuation of AppLovin is implied market cap of $35.7 billion and target price per share of $99.8. This represents 17% higher than the...

Douglas Kim

AppLovin IPO Preview

AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO.

Douglas Kim

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