AppLovin Struggles, But Focuses On NFTs For Growth

Photo Credit: Gerd Altmann / Pixabay

The global mobile application market is estimated to grow at 13% CAGR through 2030 from $187.58 billion in 2021. Despite the strong projections, AppLovin (Nasdaq: APP) is not very optimistic about the future. Its recent second-quarter results failed to meet market expectations. The macroeconomic uncertainty caused it to drop its outlook as well. But the company is banking on the emerging trend of NFTs to drive growth.

AppLovin’s Financials

AppLovin’s second-quarter revenues grew 16% to $776.2 million, falling short of the market’s estimates of $839.7 million. Non-GAAP loss was $0.06 per share, compared with an EPS of $0.15 per share forecast by the market.

By segment, its Software Platform revenues surged 118% to $318 million. Trailing twelve months Software platform enterprise clients grew 141.8% to 503, and revenue per client increased 15.3% to $1.82 million. However, revenues of the Apps segment declined 12.3% over the year.

AppLovin was not very positive about the coming quarters. The mobile app industry is facing several headwinds and while the consumption of mobile gaming apps is stable, consumer spending is down compared to last year. Developers are also reacting to mobile platform privacy updates by being more cautious about their growth and user acquisition investment strategies that has resulted in a slowdown in the discovery of apps. Add to that the macroeconomic uncertainty, and AppLovin does not expect a rosy mobile gaming market. For the current fiscal year, AppLovin now forecast revenues of $2.84 – $3.14 billion compared with the earlier forecast of $3.14-$3.44 billion, missing the market’s estimate of $3.32 billion.

AppLovin’s Growth Focus

Despite the weaker market conditions, AppLovin continues to expand its product offerings. It recently announced the release of the first non-fungible token (NFT) marketplace for developers to monetize mobile gaming through its subsidiary, OpenVessel Technologies. Known as Vessel, the marketplace allows mobile game developers to integrate NFTs into games to drive engagement and revenue. The service is available on both Apple and Google Play app stores.

AppLovin launched Vessel as an all-in-one marketplace and wallet that will make it easier for customers to gain access to customized NFTs. Developers will be able to allow users to securely buy, sell, and trade their NFTs and convert their earnings into cash. The platform has seen positive response from the industry and recorded early interest with dozens of developers actively integrating the marketplace into their games to drive additional revenue. Gaming studios, such as Lion Studios recently integrated a NFT in-game event into its Match 3D game and saw an increase in user engagement and average revenue per daily active user.  

AppLovin’s stock is trading at $17.67 with a market capitalization of $6.54 billion. The stock has taken a beating in the last year and fallen from a 52-week high of $116.09 in November 2021. Earlier this month, it hit a 52-week low of $16.47. In April 2021, AppLovin had listed at a valuation of $26.8 billion.

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Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research ...

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