AppLovin stock hit the Nasdaq on April 15. The AppLovin direct listing put up $2 billion on 25 million shares, which came to an opening price of $80 a pop.

A direct listing is when you go public directly on the exchange instead of creating new shares. This saves weeks of time and effort preparing for an IPO.

Unfortunately, AppLovin Corp. (NASDAQ: APP) shares dive-bombed quickly after that. They fell 22.5%, down to just above $60 the following day.

Clearly, there wasn't much interest at the $80 mark. Now, investors want to know where that new average will be.

Here's what to expect from this company as shares continue to change hands on the public markets and when you should think about buying it.

What Is AppLovin?

AppLovin helps people sell apps.

Making apps and getting them to market can be hard work. You need to develop it, market it, publish it, and monetize it. Well, AppLovin works with app developers to streamline all of that through its marketing platform.

Much of AppLovin's work is directed at mobile gaming apps. It operates Lion Studios, a mobile app company, and invests in a number of mobile game publishers.

This company owns a variety of mobile game studios, with more than 200 games offered.

Forty-nine percent of AppLovin's revenue in 2020 came from businesses using its software tools. Fifty-one percent came from purchases within its apps.

We know that mobile gaming promises to be a big growth industry. The industry produced $77 billion in revenue for 2020. The number of users increased by 12%, to 2.5 billion.

The total mobile apps market is worth $189 billion. AppLovin's revenue is about 1% of that.

But AppLovin's client pool stands the chance of increasing quickly over the next few years.

Mobile gaming is only going to be more involved, with better visuals, better connections with other players, and all-around better experiences.

Today, AppLovin has 410 million users. What could stop this company from taking even more of the market?

Why Applovin Stock Flopped

AppLovin's revenue for 2020 was $1.4 billion. It was a 45% increase year over year. Still, the company has not managed to see a profit, with a loss of $125 million.

The company compares to Roblox Corp. (NYSE: RBLX), another recent direct listing. Roblox and AppLovin compete in the mobile game sector, both platforms that offer a selection of games.

However, Roblox stock had an almost inverse performance compared to AppLovin after its IPO. The stock started at around $69, then climbed over $80 in a month.

AppLovin turned in higher revenue for 2020 compared to Roblox's $923 million. It lost about $125 million, only half of Roblox's $253 million loss.

To explain why the Roblox stock price seemed to fare better than AppLovin, look no further than the brand.

Roblox has more name recognition behind an exciting, engaging business model that allows young gamers to participate in building the games themselves in Roblox Studio. It opens a community where people can play and improve each other's games.

As a result, the Roblox library includes over 50 million games. This is the essence of the Roblox business.

Compare that to AppLovin, a company almost perfectly straddled between two revenue streams – the app and the in-game purchases.

An analyst told The Wall Street Journal that the AppLovin IPO may have been priced with more consideration for its software platform than its game apps. The problem, of course, is that the mobile game revenue makes up half the company's revenue.

Now, the question is whether AppLovin can successfully keep a foot in both worlds and still capture its target market.

When Should You Buy AppLovin Stock?

Some analysts argue that the Roblox craze could have been mostly due to the pandemic giving kids more time to play video games. They say a reversal in demand is possible.

But when you consider how mobile gaming is changing, that's just plain crazy.

The cloud gaming market is set to hit $7 billion in value by 2027, or 1,300% growth from 2019. This movement will see mobile, PC, and console gaming become increasingly integrated, which will certainly spike mobile gaming app demand.

Demand for AppLovin's software will increase, in turn.

Another important thing to consider – on the gaming end, much of this company's portfolio is it's own. The data it receives from customers is all first-party data, so it's safe from any new restrictions resulting from new Apple Inc. (NASDAQ: AAPL) or Google data sharing policies.

So, AppLovin controls its own data sharing policies, which users can either opt into or don't. That means, as big tech starts to give customers options to shield their data from third-party sharing, AppLovin's books are left mostly untouched.

Finally, AppLovin does stand a chance in both the app production and mobile gaming sectors it serves. With all the growth potential in these industries, and AppLovin being a major contender, the stock should find its bottom soon.

Because AppLovin stock is fresh on the public market, it's going to see some fluctuation in the coming weeks. But the long-term trend doesn't lie.

In five years, the stock will be worth more than it is today. But you could probably get it cheaper within the next few weeks. Keep watching the AppLovin stock ticker "APP" in the meantime.