The AI Stock Market: A Love Affair with AppLovin, Palantir, and Nvidia
The AI stock market is on fire, and investors are taking notice! While the spotlight has recently shifted from AI powerhouses Nvidia (NVDA) and Palantir Technologies (PLTR), AppLovin (APP) has consistently appeared on the radar of top mutual funds over the past six months. With earnings on the horizon, AppLovin is poised to make a splash, joining the prestigious Investor's Business Daily Breakout Stocks Index.
AppLovin, a California-based company, provides a comprehensive suite of services for digital app developers, including marketing, monetization, analytics, and publishing tools. Its performance has been nothing short of impressive, with sales growth ranging from 39% to a staggering 77% in the last four quarters. In the second quarter alone, sales skyrocketed to over $1.25 billion, a 77% increase.
But here's where it gets controversial: earnings growth has been even more remarkable, ranging from 149% to 317% over the last five quarters. Second-quarter earnings per share soared to $2.28, a 153% jump. As AppLovin prepares to announce its third-quarter results on November 5, analysts predict a 90% surge in earnings to $2.37 per share, with sales increasing by 12% to over $1.36 billion. Wall Street anticipates a full-year profit leap of 104%, reaching $9.26 per share.
This exceptional growth has not gone unnoticed by leading money managers. In the latest report, top funds acquired an estimated $700 million worth of AppLovin stock, surpassing the $538 million invested in Palantir. Although these figures are dwarfed by the $4.72 billion investment in Nvidia, they highlight the enduring appeal of AI stocks. And this is the part most people miss—the demand for AppLovin is further evidenced by its B+ Accumulation/Distribution Rating and an impressive 2.2 up/down volume ratio.
In August, AppLovin demonstrated its strength by breaking through a 428.99 buy point in a first-stage cup pattern. Shares subsequently hit a record high in September, despite a subsequent retreat. The stock has since found support at its 50-day moving average, and it recently rebounded above its 21-day exponential moving average, which had been trending downward. However, investors should exercise caution when buying stocks just before earnings reports, as it can be a risky move.
As AppLovin potentially forms a new base, possibly a cup pattern, all eyes are on its upcoming earnings release. A positive report could catalyze a breakout move. Investors, however, should always approach high-growth stocks with a risk management mindset, understanding when to buy and sell.
For those interested in diversifying their AI stock portfolio, the IBD Breakout Opportunities ETF (BOUT) from Innovator Capital Management offers exposure to the IBD Breakout Stocks Index. This ETF allows investors to easily invest in the entire index, providing an alternative to buying individual stocks. Stay tuned as the AI stock market continues to evolve, and don't forget to consider the principles of risk management in your investment journey.
