I'm Loading Up on This Stock.. (Everyone is Wrong)

Okay, this stock is far too cheap. The stock we're talking about trades at 14.25xp with a PEG ratio of.5. This is by definition one of the cheapest stocks you will find in the stock market right now. The stock that we are talking about today is Apploven. Yeah, what a company. stocks down about 50% year to date, a little more than that. And it's one of the cheapest, if not the cheapest stocks in the stock market right now, and I'm going to tell you what's going on with this company, how I'm looking at it, how much Apple oven I just bought, and my thoughts on their future. Keep in mind throughout this video, this is not a recommendation nor financial advice. You need to come to your own conclusions. And just like I'm going to share with you mine, it's not a guarantee. Now let let me simplify this so you understand what apploven does. So apploven was basically bred out of a necessity. Okay. Back in I believe it was 2017, Apple changed their privacy standards. So your data was no longer being shared with everyone especially if you opted out. That made it very difficult to target advertising on mobile devices. We all have a mobile mobile phone and especially around gaming. So a lot of gaming studios all of a sudden found it basically impossible to advertise effectively. One of the main ways that mobile advertising studios make money. Well, AppLoving said we will fix that. We will use other data set data sets and data signals that we can collect and put it together in this algorithm to predict and create target advertising. Well, apploving has dominated mobile advertising. They have over a 50% market share in all mobile advertising or at least mobile advertising centered around gaming and that is what has led to applovening success. Apploven gets more data. That data goes in to train their algorithm which makes their ad targeting more effective and gives their advertisers a better return on at on on dollars spent basically rights is what it's called. So that's kind of the business of applovening. Now they've grown into a large company. They're about a 98 billion market cap today. They were much higher than that at their all-time high. They were over a $200 billion business. They are one of the most profitable companies that has ever lived and that's one of the arguments that the bears are trying to make right now is that is going to change. Well, recently Applovin said, "Okay, we've won the mobile advertising space. We are the dominant player here. The growth is basically saturated, right? They've basically penetrated what they can penetrate here. So they have started leaning into external advertising like not just in-game advertising but to web services. So they have a web portal. You no longer need to be invited to advertise with apploving. You can go to the web portal and run advertisements inside of mobile games. Think about it like like comfort, right? The the clothing company. Comfort can now just go to the app and terminal and say, "I would like to target advertising to mobile users, people that play games on their phone, right? And you could sign up, whatever, do the bidding process, and then Apploven is going to target those ads with people that are likely to buy a comfort hoodie or comfort pants." That's basically how it works. That is what Apploven is now doing. And this is where you get into problem number one. So there's something called pixel downloads that is basically like the tracker that allows applovening or other companies to get the data from you. Right? So it's the Axon pixel. It is placed on e-commerce websites often automated via Shopify to feed shopping data back into Apploven's AI uh ad bidding engine. Analysts use raw pixel downloads and installation metrics as a direct proxy to measure whether apploven is successfully onboarding real world merchants outside of its core mobile gaming market. Wells Fargo recently came out and said, "Wait, hold up a second." Because Apploven's uh pixels went from like 11,000 to 13,000 in a week. And that looked really good. Wells Fargo says, "Hold up, wait a second." Um, they analyzed the data and called it a false start. Their research revealed that the vast majority of the new downloads came from lowra Asia-Papacific Shopify storefronts that do not provide meaningful traffic weighted revenue. Now, there's a long way to go here, right? If apps at 11 to 13,000 pixel sites, Snapchat's over 118,000, Pinterest is 490,000 sites, right? So you are very early in this next uh growth arena for app loving. So that was the concern you know a couple days ago. The bigger concern today and more recently is unity. So Apploven basically reached out to Unity and said look uh we know that you're siphoning some of our data from our bidding auctions and using it to train your algorithms. Unity basically said, "Yeah, okay. We'll we'll stop doing that in five days." Well, Apploven said, "That's not good enough." And they filed a lawsuit against Unity. I'm just going to read this post to you. I think it does a very good job of breaking down this uh Unity situation. It says, "Apploven is down 5% amid fears that rival Unity has been siphoning data to train its models. Apploven is now suing Unity over data allegedly taken from mobile ad auctions. Unity has offered to stop collecting it, but Apploven says it is not enough. Apploven runs Max, the main platform publishers use to auction their ad slots. Because it runs the auction, it sees every bid, the clearing price, which ad won, and how users engaged. Competitors bidding into Mac see none of it. That unique data is what makes Apploven's moat. Unity offers publishers a free tool called ad quality, which blocks bad ads. Apploving says the tool has been has also been recording details on ads apploven wins and serves creates revenue engagement clearing prices auction IDs and the bid waterfall. It alleges that unity fed that data into the models it uses to bid against apploven. Unity's side is that ad quality is a publisher tool. P publishers share the data by choice and Apploven is a dominant incumbent using litigation to slow down arrival whose results have improved. Um he says I obviously have no insight on this matter but here is what Unity did. Unity offered to turn off collection on Max auctions within five business days which seems to me like a confirmation that this is really happening. And yet Apploven said no because the offer didn't cover the full damage data already collected models allegedly trained on it and other platforms like Level Play and ADM Mob. For Apploven, this is a structural risk. It's its edge is seeing the whole auction while rivals bid partially blind. If a uh compatible bidder uh second bidder can watch outcomes and train on them, competition bids rise and apploven spread can shrink even when it still wins. Even if the court stops the data feed, that doesn't automatically undo training that already happened. However, without a continued feed of fresh data, the long-term damage seems quite limited. So, basically, Unity already said and and kind of uh read between the lines here, but Unity already said, "Yeah, we're we're siphoning your data." They already agreed to stop doing it. Apploven basically said, "Yeah, it's not good enough. You already trained your models. You already benefited from our proprietary data. That's a problem. We need to be compensated for it. And that's the part that Wall Street does not seem to understand with this whole Unity situation. Unity is up about 7% today. Why? Because Apploven literally Unity and Apploven. They both basically admitted that Unity just got a at least short-term advantage here. not advantage over apploving but in the near term they're able to compete a little bit better because their algorithm stole the company stole data from applovin [laughter] right um long story short so unity is up today apploven is down today the question is what do the courts say because I mean obviously they're not going to be allowed to siphon apploven's data right that's surely going to be protected from a court's perspective does apploven get some kind payout here. Probably not. I don't think that matters for the investment thesis of Apploven. Wall Street's really getting this wrong because they're assuming that a short-term like data siphoning event is going to create long-term advantages for a company like Unity over AppLoving. That's not how these things work. These algorithms need to be updated all the time because consumers signals change, right? consumer behavior is changing. The same thing somebody did a month ago is not what they are doing the next month, right? What games they're playing, where they're, you know, shopping, things like that. So, I really view this as like a short-term overreaction in the marketplace based on something that is literally by definition temporary. If you have to re-update your algorithms, the next updated algorithm is going to be far less um competitively impactful to AppL. Again, the argument is saying that if Unity is getting better at seeing what the bids look like for Apploven, they can just bid higher and squeeze Apploven's profit margin, thus giving Unity advertisers a better return on their investment and taking that away from AppLoven. Now, Apploving has gross margins in the high 80% range. They are a cash cow. They take a lot of money to the bottom line. They're one of the most profitable companies in existence today and they trade at again like I said a crazy low valuation. You're basically assuming if you're selling Apploving here or if you're shorting the stock or whatnot, you're basically assuming that the company wildly misses earnings next year. You know, you're you're projecting $20 of EPS next year. Um we'll see where the revenue comes in, but last quarter they grew revenue 53% year-over-year. You're expecting those numbers at this point to collapse if you're trading the stock with a PEG ratio of 0.5. And I just don't think the situation is nearly as bad as people think for the more medium term. Could Apploving come out and miss on earnings? Sure. Like, is that possible? Of course. I don't think they're going to, but could they? Yes. If they did, stocks going to fall. the short-term fears are going to get the best of the marketplace and AppLoving stocks going to decline. But 6 months from now, do I think this is going to be an active conversation here? No. And that's just my opinion and that's where again you guys need to come to your own conclusions. Is uh Unity going to be able to continue to siphon Apploven's data? Well, even Unity said they would stop. So, I I I I don't think this is a long-term structural problem for the company. Now, how long does it take for their web advertising to catch on? If you look at the pixel data, it looks great. It looks like that's that is already happening. If you look at what Wells Fargo said that this was a false start, then maybe it's not picking up as fast as people thought. somewhere in the middle. I think the results are probably going to be better from the web advertising portal than people are expecting at this point. But is it gang busters? Probably not. A lot of companies, they they they look at their budgets and where they're advertising, you know, uh where they're spending advertising dollars on a quarterly and bianual basis. They're typically not going out week by week to say, "Yep, we spend a little too much on Google. We should spend a little bit more on Apploving, a little bit more on Snapchat." They typically do that on a quarterly basis and set budgets aside every couple of months. So, structurally, it's going to take longer for um an open market web, you know, advertising portal to to catch on. But at this point with the stock at $281 per share, I think people are too negative, you know, and I'll be honest, back when Apploven was like $600 a share, I did not like the stock. I I didn't Well, it's not that I didn't like the stock. I just didn't like the riskreward. I thought it was uh pretty fairly valued, pretty in line with where I would think the stock would be. But today at $281 per share with the launch of the web portal, eventually it's going to be successful, right? I I don't think there's a major question in the air whether or not it will be successful. The timing is a little bit different. And is Unity going to have this long-term structural advantage here to compress app and margins once they lose the ability to siphon and track the the bids on advertising? I don't think so. So, if those are the two main problems right now, the stock's trading at 14 times forward earnings with a PEG ratio of 0.5 expected to grow revenue or grow EPS next year at about 30% and revenue likely in the 30% range as well. I think you have one of the best buying opportunities on the market today trading at a massive discount. Now, recent analyst price targets are as followed. Morgan Stanley on September 13th rated the stock a buy with a $450 price target. Uh BTI rated the stock a strong buy with a $396 price target. Evercore ISI on August 31st rated the stock a buy with a $510 price target. Needam on August 25th rated the stock a strong buy with a $475 price target. So on and so forth. Group in the last couple of days reiterated their buy rating on Apploven and put out a $600 price target for the stock. Um again, city analyst Gupta initiated a short-term upside view on the stock again reiterating a n a $600 uh dollar price target. And uh he says the AI ad tech company could see a massive rally over the ensuing 90 days. due to underappreciated sequential growth potential. Loop Capital also joined City in adjusting his price target to $600 in late August. So like not all hope is lost right from uh you know even some of the Wall Street guys are like look this is probably overdone at this point but this recent development with unity yesterday added another layer of complication to the stock that I think is presenting an opportunity apploven's management is expecting 30% compound revenue growth rates for the next 10 years they are projecting apploven to 1b be a one day be a trillion dollar company, which is a 10x in market cap from here. But I will tell you there was a pretty solid line in the sand around $300 per share recently. You've broken below that now again at about $282 per share. You're kind of in no man's land here, right? Um especially if earnings are bad or we do get any other bad news, you could fall to like $200 a share. that is in the cards here, especially when you're dealing with the amount of fear that the stock is dealing with right now. So, by no means am I saying that we have bottomed. What I am saying is I think this is one of the most, if not the most attractive buying opportunities in the markets right now. So, what am I doing? Well, I already have some decent positioning. I already have like 30 to 50 grand worth of Apploven. I'm down about 13% on the stock. So, my average cost is somewhere around 320. Um, again, I think the stock can go lower. I've been nibbling here. So, I'll buy like I bought like five shares today. You know, if the stock goes down tomorrow, I'll buy another like five shares, right? I'm kind of nibbling because I will go hard in the paint to put it that way. Around $200 a share. So, if the stock continues to come under pressure, bad news, whatever happens, $200 a share is where I think it's just so asymmetrical. Like, I'm gonna go big in it, right? But can the stock continue to fall? Could we fall another $80 per share? That is a possibility. So, I'm prepared for that. I'm also positioned for the bounce if that does come. You ultimately want to see the stock get above $300 again because that was the prior really strong level of support we had following the selloff of last earnings. You know, the stock would briefly come down to like 298, snap back above 300, run to the 330s, right? You kind of did this back and forth, back and forth. We've just broke down a little bit in the last couple of days. And that break of 300 could send the stock down, you know, quite a bit further. We don't really have any support here until maybe like 250 or so, but even then you can't really make a definitive claim there. 230 better level of support. That is your gap up moment back here when Apple was in their was in their heyday, right? When everyone was making short reports on the stock and people were fighting against the rally back here in um November of 2024. So yeah, that's that's kind of how I'm looking at the stock right now. big buyer, big uh um big opportunity in my view. If you guys want to come join the trading community and come invest alongside of us, there is a link down below in the description of today's episode for that. Again, in the trading community portfolio, we we are up 108% year-over-year or year-over-year year to date. So, we're outperforming all of Wall Street, hedge funds, institutions, all of them. I uh I like to find these asymmetrical opportunities, these stocks that are being overlooked, over discounted where there's too much fear and actively make investments into companies like this. And Apploven fits that bill perfectly. Obviously, not a recommendation. Come to your own conclusions. As always, that link is in the description of today's episode if you guys would like to come join us. Have a fantastic rest of your day nonetheless and I will see you in the next