DCF Studio

    APP · NMS · Communication Services

    AppLovin Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 157.70

    Market price

    USD 308.06

    Implied upside

    -48.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 24.1x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 157.70-48.8%
    Exit multiple
    USD 359.02+16.5%
    Market price
    USD 308.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn9bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.8bnUSD 8.5bnUSD 10.7bnUSD 13.3bnUSD 16.6bn+24.8%
    EBITUSD 3.0bnUSD 3.7bnUSD 4.7bnUSD 5.8bnUSD 7.3bn+24.8%
    NOPATUSD 2.7bnUSD 3.4bnUSD 4.3bnUSD 5.3bnUSD 6.6bn+24.8%
    Add depreciation & amortisationUSD 1.1bnUSD 1.4bnUSD 1.7bnUSD 2.1bnUSD 2.6bn+24.8%
    Less capital expenditureUSD -82.1mUSD -102.5mUSD -128.0mUSD -159.8mUSD -199.5m+24.8%
    Less increase in working capitalUSD 47.0mUSD 58.7mUSD 73.3mUSD 91.5mUSD 114.2m-24.8%
    Free cashflow to firmUSD 3.8bnUSD 4.7bnUSD 5.9bnUSD 7.4bnUSD 9.2bn+24.8%
    Discount factor0.93000.80430.69560.60160.5202-
    Present valueUSD 3.5bnUSD 3.8bnUSD 4.1bnUSD 4.4bnUSD 4.8bn+8.0%
    Present Value Of The ForecastUSD 20.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.997Reported 2.488, pulled toward 1.0 (Blume)
    Cost of equity15.98%Risk-free + beta x equity risk premium
    Cost of debt5.83%Interest expense / average total debt
    Market capitalisationUSD 103.5bn96.7% of capital
    Total debtUSD 3.5bn3.3% of capital, book value as a proxy
    Tax rate8.7%Effective, capped at statutory
    WACC15.63%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 157.70

    62% of EV

    Forecast FCFF, final year
    USD 9.2bn
    Capex at depreciation, working capital in reinvestment
    USD 9.1bn
    Less reinvestment at g/ROIC (6.6% of NOPAT)
    USD -596.6m
    Capitalised
    USD 8.5bn
    ROIC (reported)
    37.9%
    Terminal value, undiscounted
    USD 66.0bn
    Terminal value, discounted
    USD 34.3bn
    Enterprise value
    USD 55.0bn
    Less net debt
    USD 1.1bn
    Equity value
    USD 53.9bn

    Exit at 20.0x EBITDA

    Value per shareUSD 359.02

    83% of EV

    Terminal value, undiscounted
    USD 198.3bn
    Terminal value, discounted
    USD 103.2bn
    Enterprise value
    USD 123.8bn
    Less net debt
    USD 1.1bn
    Equity value
    USD 122.8bn

    Spread between methods: 78%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    13.63%179.88183.92188.31193.09198.32
    14.63%165.01168.24171.73175.49179.57
    15.63%152.29154.90157.70160.70163.94
    16.63%141.28143.41145.69148.11150.71
    17.63%131.66133.42135.28137.26139.37

    Outlined: this model. Green text: above today's price of 308.06. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year24.8%44.9%+20.1pp
    Discount rate15.6%9.5%-6.1pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.