Shares of AppLovin shot up to $408.44 during today's afternoon trading session -- an increase of 7.7% that brings the stock 30.13% over its average analyst target price of $313.88. This may imply limited upside for the Software stock, whose analysts give it a consensus rating of buy, and target prices spanning from $105.0 to $480.0 dollars per share.
We can use AppLovin's short interest as a proxy for determining general market sentiment regarding the stock. The short interest is the percentage of the share float that represents short positions, meaning that the investor believes the stock will decline in the future. Since APP's short interest is 5.8%, the market sentiment is mixed on this stock.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
Another way to gauge the sentiment on AppLovin is to look at the percentage of institutions that are invested in the stock. In this case, 63.8% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
In conclusion, we see mixed market sentiment regarding AppLovin because of an analyst belief that shares are overpriced, a buy rating, an average amount of shares sold short, and an average number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about APP:
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The stock has trailing 12 month earnings per share (EPS) of $3.3
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AppLovin has a trailing 12 month Price to Earnings (P/E) ratio of 123.8 compared to the S&P 500 average of 29.3
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The company has a Price to Book (P/B) ratio of 146.03 in contrast to the S&P 500's average ratio of 4.74
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AppLovin is a Technology company, and the sector average P/E and P/B ratios are 30.01 and 3.91 respectively
