Digital Turbine: Buy, Hold, Or Sell?

Unabated Growth

APPS essentially started out as a penny stock, with its stock price ranging from $1-2 for nearly a decade. The stock made a breakthrough in 2019, when it began partnering with the giants of the tech industry. APPS has gained 2677.2% over the past three years, backed by its impressive revenue growth. The company’s revenues have increased at a CAGR of 103.4% over the past three years, while its total assets have increased 22.4% over the same period. Its trailing 12-month gross profit has increased over 400% over the past three years.

Impressive Revenue and Earnings Outlook

Because the software industry is expected to remain one of the forerunners this year and beyond, and APPS is well-positioned to ride the growth, analysts expect the company’s EPS to rise 240% in the current quarter (ending March 31, 2021), 215% in fiscal 2021, and at a rate of 50% per annum over the next five years. The company’s revenue is expected to rise 89.7% in the current  quarter, and 102.3% in the current year.

High Volatility and Stretched Valuation

APPS stock quadrupled in value within three years to exceed $5 billion in market capitalization. Such impressive gains are often associated with substantial volatility, making the stock a highly speculative bet.

APPS has a beta of 2.4, which signifies  its high volatility. And while the company outperformed benchmark indices over the past couple of years, the  performance appears to be unsustainable. The stock has declined 20.2% over the past five days since hitting its 52-week high of $70.40 on January 25. Moreover, analysts expect a further dip in price soon; Indeed,  they expect the stock to decline 22.1% in the near future.

APPS stock’s decline over the past couple of days can also be attributed to its sky-high valuation. In terms of its non-GAAP trailing 12-month P/E, APPS is currently trading at 150.55x, 465.4% higher than the industry average of 26.63x.

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