Our process in action: AppLovin
In-house detailed fundamental research is the basis for all stock selection.
We look at AppLovin as a stock in focus and unpack why our team see a long runway for the company.
All information is current as at its published date unless otherwise stated.
This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (‘Fidelity Australia’). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International. Prior to making any investment decision, investors should consider seeking independent legal, taxation, financial or other relevant professional advice. This document is intended as general information only and has been prepared without taking into account any person’s objectives, financial situation or needs. You should also consider the relevant Product Disclosure Statements (‘PDS’) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 044 922 or by downloading it from our website at www.fidelity.com.au. The relevant Target Market Determination (TMD) is available via www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated about specific securities may change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. You should consider these matters and seeking professional advice before acting on any information. Any forward-looking statements, opinions, projections and estimates in this document may be based on market conditions, beliefs, expectations, assumptions, interpretations, circumstances and contingencies which can change without notice, and may not be correct. Any forward-looking statements are provided as a general guide only and there can be no assurance that actual results or outcomes will not be unfavourable, worse than or materially different to those indicated by these forward-looking statements. Any graphs, examples or case studies included are for illustrative purposes only and may be specific to the context and circumstances and based on specific factual and other assumptions. They are not and do not represent forecasts or guides regarding future returns or any other future matters and are not intended to be considered in a broader context. While the information contained in this document has been prepared with reasonable care, to the maximum extent permitted by law, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. Past performance information provided in this document is not a reliable indicator of future performance. The document may not be reproduced, transmitted or otherwise made available without the prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is Fidelity Australia.
© 2025 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.
One of the beauties of global small and mid-caps is there's lots of opportunities all around us if you're willing to do the work and find them. One stock that has been a strong performer for us in recent times has been a company called AppLovin which is based in the US. And it's a company that has appreciated eightfold in the past 12 months alone. Now AppLovin historically have owned a collection of mobile video games. And most people who know AppLovin know them for that. However, the real gem, the real core asset of their business is this advertising technology business. And what they do is they've got an AI platform that matches, people that want to buy ads on mobile video games with the studios that own those video games and have the ad inventory to sell. If you think about Facebook or Instagram, they do something similar, but in the social media platform where they match advertisers and viewers together and they serve you ads relevant for your tastes and interests. AppLovin do something similar but in the mobile video game space rather than in the social media platform. 2024 was a breakout year for them. Their revenue growth almost reached 50%. Their earnings per share grew fourfold. Management are executing really well. They’re growing their target addressable market quite substantially. The company generates a lot of free cash flow. It's got really attractive shareholder returns. And also management have announced, literally only a few weeks ago, that they'll be divesting the mobile game division which will bring in some money, help them strengthen the balance sheet even further. But more importantly, it will allow management to focus all their time, efforts and energy on the thing that counts which is really their advertising technology business. And the last thing I'd also add is the CEO is one of the co-founders of the company. He owns quite a large number of shares, about 3% the company. It's worth a few billion dollars that stake. So he's really well aligned with outside shareholders as well. I think an allocation of global small mid-caps could really complement large and mega capture a number of ways. Firstly, from a valuation perspective. Large caps are trading at only valuation peaks right now. Whereas if you look at the small and mid-cap segment, they're trading at valuation multiples that are right in line with their long term historical averages. So you can get diversification and a much more compelling, valuation opportunities if you look into the small and mid-cap segment. Second thing I'd say is, diversification across industries and sectors. And if you look at small and mid-caps are a lot less tech heavy, thin than large and mega caps, but also provide similar, attractive growth opportunities. So you're getting diversification as you move down by moving into different, business models, different sectors, different industries. And the final point which is worth mentioning is if we are indeed moving into a world of increasing friction to global free trade, whether it be tariffs or, you know, a global trade war, we see a lot of headlines around that. But if this is the world we're moving into, where there's frictions to, to, to global trade, then ideally you'd want companies that are more domestically focused because they can evade, all of this tit for tat global trade wars, your large cap, globally dominant businesses, they've got their tentacles pretty much in every continent around the world. It's very hard for them to navigate and evade, any tariffs or tit for tat trade wars.
