AppLovin would be more valuable without its 1P games, Morgan Stanley argues

June 09, 2025 11:27 PM AEST | By Investing

Google News:

AppLovin would be more valuable without its 1P games, Morgan Stanley argues — Image source: Kalkine Media

Recent News

BNP Paribas Exane dubs Goodyear "tariff winner," shares surge

Goldman Sachs downgrades General Mills, Conagra on cost pressures, wea...

SEC progresses toward DOGE goals, eyes voluntary workforce reductions

MS downgrades McDonald’s on limited upside and structural pressures on...

Investing.com -- Morgan Stanley analysts raised their price target for AppLovin (NASDAQ:APP) to $460 from $420 a share in a note Monday, arguing that the company would be "more valuable without its 1P games."

The firm expressed bullishness on Overweight-rated AppLovin’s plan to sell its apps segment, anticipating that this move would "enhance shareholder value and be neutral to future earnings."

As announced in February, AppLovin intends to sell its first-party mobile games business, known as the Apps Segment, to Tripledot Studios in Q2 2025 for $400 million in cash and $400 million in Tripledot stock.

While this segment contributed 32% of revenue and 10% of EBITDA in 2024, Morgan Stanley (NYSE:MS) views the divestiture as a "bullish development."

The analysts explain that the sale would enable AppLovin to recognize "high-margin revenue that the 1P studios spend on APP’s ad network, offsetting most of the lost earnings from 1P games."

The strategic shift is said to effectively reallocate profits "from the low multiple games business to the high multiple ad business, increasing the total value of the company."

Morgan Stanley has adjusted its 2026 and 2027 EBITDA forecasts for the company down by 1% for each year. However, they are applying a higher EBITDA multiple of 29x, up from 26x previously.

This adjustment reflects a move away from a Sum-of-the-Parts (SOTP) valuation where the apps EBITDA was valued at a mere 4x.

This article first appeared in Investing.com

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (“Kalkine Media, we or us”), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary.
The content published on Kalkine Media also includes feeds sourced from third-party providers. Kalkine does not assert any ownership rights over the content provided by these third-party sources. The inclusion of such feeds on the Website is for informational purposes only. Kalkine does not guarantee the accuracy, completeness, or reliability of the content obtained from third-party feeds. Furthermore, Kalkine Media shall not be held liable for any errors, omissions, or inaccuracies in the content obtained from third-party feeds, nor for any damages or losses arising from the use of such content.
Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyrighted to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have made reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.
This disclaimer is subject to change without notice. Users are advised to review this disclaimer periodically for any updates or modifications.