By Nate Wolf

AppLovin was the top performer in the S&P 500 on Wednesday after analysts at Morgan Stanley counseled investors to buy the stock.

Shares of the mobile advertising platform jumped 11% to $569.96, putting the stock on track for its highest close since Jan. 15, according to Dow Jones Market Data.

Morgan Stanley reiterated an Overweight rating and a $720 price target for AppLovin shares in a research note Wednesday.

The positive note comes at a good time for a stock building momentum. AppLovin came into the session down 24% in 2026, but it has quietly surged in April and May after a rough start to the year.

A financial publisher made later-recanted claims in January accusing the platform of serving as a "laundering machine" for transnational criminals. AppLovin called the allegations "absurd and demonstrably false." Bloomberg then reported in February that a Securities and Exchange Commission probe into the company was ongoing. AppLovin didn't respond to Barron's request for comment at the time, and no developments have emerged since.

Both of those reports drove the stock down early in the year.

AppLovin's above-market performance has continued despite the distractions. The company's gaming ad revenue -- its bread and butter -- rose at a 60% compounded annual rate from 2023 through 2025, far outstripping the 5% growth in overall spending on mobile games. But 99% of ads AppLovin shows don't convert into app downloads for its customers, Morgan Stanley said, presenting more room for growth.

"When APP delivers better ad targeting, its unit economics, growth profile, and margins all improve," wrote analysts Matthew Cost and Brian Nowak. "We believe this has been the primary mechanism behind APP's above-market growth in recent years, as its ad targeting models have become far more efficient over time."

AppLovin's conversion rate is currently 10 times lower than that of Meta Platforms, but it doesn't need to make up this full gap, Morgan Stanley said. Even small improvements make a difference. Every 10-basis-point jump in conversion represents 17% upside for net revenue, the firm estimated.

AppLovin's Axon ad targeting model can help drive this improvement. While investors don't get many details about Axon's model improvements, the machine learning model has a strong track record, Morgan Stanley argued.

While the firm's $720 price target remains its base case, Cost and Nowak see revenue coming in 50% above consensus by 2030 if conversion rates continue to improve at their current pace. That would mean a bull-case target of $1,100.

Most analysts have stuck by AppLovin since the winter pullback. Of the 37 analysts tracked by FactSet, 86% rate the stock the equivalent of a Buy. The average price target is $656.14.

Write to Nate Wolf at nate.wolf@barrons.com

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May 27, 2026 12:42 ET (16:42 GMT)

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