Technology in general and artificial intelligence (AI) in particular are among the strong drivers of the 2024 stock market year. As far as individual stocks are concerned, the names of US large caps such as the chip company Nvidia, the streaming giant Netflix and the social media giant Meta Platforms quickly come to mind in this context. It is true that this trio is among the top performers in the NASDAQ-100 index just a few weeks before the close. However, a smaller and far less well-known company has really stolen the show from the heavyweights. AppLovin's share price has risen by no less than 754% in the year to date. This means that the stock, which has been listed on the US technology exchange NASDAQ since April 2021, has outperformed the "main AI beneficiary" Nvidia by around 570 percentage points. Until recently, AppLovin would not even have appeared in the NASDAQ-100 ranking. It was only on November 18 that the share was included in the US technology barometer.
The Silicon Valley company's success model is in its name. With their "love of apps", the Californians have their finger on the pulse of the times. "Our goal is to create meaningful connections between companies and their ideal customers," writes the management in the 2023 annual report. AppLovin uses special software to help its users monetize contacts and increase their reach. The company, which was founded in 2012, also develops its own apps. AppLovin's solutions are used in particular by game developers. However, many other industries are now using the digital tools. For example, the mail order company Otto uses the "AppDiscovery" application, a marketing software from the Californians, to capture as many attractive orders as possible on its app.
AppLovin uses AI here and in many other places. A specially developed advertising engine uses the software's immense reach and wealth of data to optimize the analysis in a matter of seconds. Thanks to such possibilities, AppLovin has been labeled an "AI profiteer" on Wall Street. However, the rally is not just based on fantasy - the company is also delivering hard facts: For the third quarter of 2024, AppLovin reported revenue of just under USD 1.2 billion, representing year-on-year growth of 40%. The operating margin (adjusted EBITDA) was 60% in the past quarter, 11 percentage points higher than in the third quarter of 2023. CEO and co-founder Adam Foroughi expects further growth. For the period from October to December 2024, he predicts sales of between USD 1.24 and USD 1.26 billion and a stable margin. Both the reported figures and the outlook were above analysts' expectations. Wall Street reacted euphorically: AppLoving's stock market value has roughly doubled since the figures were presented on November 6.
With the chart pointing almost vertically upwards, the question naturally arises as to whether the rally has perhaps gone a little too far. It is precisely against this background that the new soft callable barrier reverse convertibles on the top performer could be of interest. The issue is equipped with a conditional coupon payment. AppLovin is put to the test on a monthly basis. If the share is quoted above the coupon trigger level of 50% of the initial fixing on the reference date, the distribution is made. In the product currency CHF, the conditional coupon is 20% p.a., while the USD-denominated variant offers 5 percentage points p.a. more. If the underlying fails to reach the low hurdle, the payment can be made later thanks to the memory effect. As soon as AppLovin meets the requirements on one of the following observation days, Leonteq will transfer the current coupon and all previously unpaid coupons. The issue can be redeemed early by the issuer on a monthly basis, for the first time after three months. The BRC is also partially protected. As long as the underlying does not fall to the barrier of 50% or lower in the next twelve months, investors receive the full nominal amount, unless redeemed early at 100%.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.