Brokerage firm Jefferies has identified AppLovin as a compelling investment opportunity, reiterating its Buy rating and $860 price target following a 39% year-to-date decline. The firm argues that recent sell-offs have created a disconnect between the company's fundamentals and its current valuation.

Jefferies analysts, led by James Heaney, believe AppLovin's stock price does not reflect its growth potential, noting the company trades at 15x its FY27 EBITDA while delivering 50%+ top-line growth. They see the recent concerns around CloudX, Meta Audience Network, and Google Genie as overblown risks that have created a dislocation in the stock price ahead of what they expect will be a strong Q4 performance.

The brokerage firm forecasts upside potential for AppLovin's fourth-quarter results, with revenue estimates reaching north of $1.66 billion in an optimistic scenario. Jefferies expects new customer contributions to partially offset seasonal headwinds in the first quarter, maintaining that the current valuation more than adequately prices in the risks while underlying fundamentals remain largely unchanged since the start of the year.