TIP843: AppLovin (APP): The 30-Bagger Down More Than Half w/ Kyle Grieve & Shawn O'Malley

**SPEAKER_1** (0:00)
You're listening to TIP.

**Kyle Grieve** (0:03)
Welcome to The Investor's Podcast today on episode 843
So on our last episode, we got to dissect a 5X that we actually ended up passing on, and I had a really, really good time digging into your investing thesis together and just kind of helping us both improve our own investing process. It was really self-reflective and it was a lot of fun.

**Shawn O'Malley** (0:20)
I think it was a great exercise, but today we're going back to analyzing a brand new business we haven't looked at before and this one is interesting because it is very much growing like an early stage startup is immensely profitable, yet it is one of the biggest losers year to date in the market, with its shares falling over 50% in 2026

**Kyle Grieve** (0:40)
So AppLovin is the name of the business that we're going to be looking at.
I think it's one of those classic businesses that the market definitely loved in the past and it's easy to see why. You had lots of growth, you had high and growing margins, and then you had minimal capital requirements to boot. So my honest starting point when I was going through this business's filings was, are we wrong in not owning this business at its current price? Because a business with the numbers that AppLovin is putting out, I just would never think that this would be the type of business that would be lumped as a value play. But the numbers that the market is offering for this business is definitely in value territory now with a mid-teens multiple.

**Shawn O'Malley** (1:12)
It was definitely a quality growth story for a long time. So now that there's a value angle, you definitely have sparked my interest. So let's get into it.

**SPEAKER_1** (1:23)
Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities.
We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your hosts, Shawn O'Malley and Kyle Grieve.

**Kyle Grieve** (2:08)
We've done quite a lot of work looking at businesses that specialize in advertising on the show. We own Alphabet and Reddit, which I'd say are direct advertising platforms, even though they have other products associated with those companies. But then we also own some companies that are still doing advertising, but in a more indirect way. Think Uber, Amazon and Netflix. These are businesses that have an advertising angle to their business, even though they aren't necessarily known for it to the same degree as maybe a Google or a social media platform like Reddit. So today, I'm excited to discuss another direct advertising play, AppLovin.
So what initially attracted me to this name was the fact that this business was number one on Yahoo Finance's list of businesses trading closest to its 52-week lows. If I told you this, you'd probably think, well, this is some crappy business that is falling apart or leveraging up while allocating capital poorly. But I think you'd probably be wrong on that as it pertains to AppLovin.
So as AppLovin continues growing at some pretty eye-popping rates, the revenue is increasing. It just increased about over 50% year over year, all while capital efficiency numbers continue to improve along with operating income.

**Shawn O'Malley** (3:11)
It reminds me a lot of the Trade Desk. They have similar business models and for a long time, the numbers at the Trade Desk look incredible and the stock kept going up and to the right. Now, that's a company that has entered value territory as some people would frame it. So Daniel and I covered that business and it really is in the same area of programmatic advertising. With the main difference being that AppLovin focuses more on showing ads in mobile apps, while the Trade Desk focuses more broadly on the connected TV ad space and this idea known as the open Internet. So outside of areas like Google and Facebook, other forms of advertising outside of the walled gardens as they're called. And so there is one striking similarity that is fairly obvious though, and that's that both stocks have been absolutely crushed due to AI disruption concerns this year.

**Kyle Grieve** (4:05)
Right. And we've largely taken the standpoint that we think there are a lot of really, really good software businesses out there that we don't think deserve to be crushed the way they have by the market. Businesses inside of the intrinsic value portfolio such as Adobe, CoStar, Intuit and Reddit all seem to us like pretty high quality businesses with the ability to continue to increase revenue even as AI creates this new type of uncertainty that they haven't faced in the past.