Citigroup is bullish on AppLovin: It may face pressure from Unity competition, but long-term growth potential remains "off the charts."

Citigroup is bullish on AppLovin (APP.US): may face competitive "pressure" from Unity (U.US), but long-term growth potential remains "off the charts"

According to Citigroup Research, mobile marketing company AppLovin (APP.US) may face competitive pressure from Unity Software (U.US) in the coming quarters, but its long-term growth prospects remain strong. Citigroup reiterated its "Buy" rating on AppLovin's stock and raised its target price from $460 to $600.

Led by analyst Jason Bazinet, Citigroup stated in an investor report: "As we enter the first quarter of 2025, we see a potential risk: Unity is launching new advertising technology solutions in its growth segment. However, our analysis indicates that if Unity's growth business starts to perform better, the potential revenue headwind may be relatively small, around $40 million per quarter."

Last week, AppLovin's stock surged over 25% after the company announced its fourth-quarter financial results.

Bazinet noted: "Perhaps the most exciting aspect of AppLovin's growth outlook is its long-term opportunities. To assess this, we conducted two sets of analyses. First, we compared AppLovin's average revenue per daily active user (ARPDAU) with various social media platforms. The analysis shows that AppLovin's revenue could grow 2 to 14 times from its current levels."

He added: "Secondly, we evaluated how AppLovin's revenue would grow if the conversion rate for purchased impressions increased from 1% to 5%. This analysis also indicates that AppLovin's revenue could grow 14 times from its current levels."

Unity is expected to announce its fourth-quarter financial results for 2024 before the market opens on Thursday. The market generally expects its adjusted earnings per share to be $0.16, with revenue of $433.47 million