Wall Street has not given up on AppLovin.Amid a wave of skepticism about the company’s short-term trajectory, at least one major bank is holding firm on its bullish stance, and the reasoning goes well beyond the stock’s recent turbulence.The question investors are really asking right now: Is AppLovin’s (APP) push into e-commerce advertising working? And if so, how big can it get?One prominent analyst thinks the numbers are about to start answering that question in a big way.E-commerce a major inflection point for APP stockTo understand why this matters, you need to understand what AppLovin does.The Palo Alto, Calif.-based company runs an artificial intelligence-powered advertising platform.Its core business has long been mobile gaming, as it helps app developers find new users by placing ads within other games. The company’s proprietary AI system, Axon, powers these placements, and it has become one of the most efficient performance advertising engines in the world.Think of it this way: a game developer spends $1 on AppLovin’s platform, and the system predicts, with remarkable precision, whether that dollar will return a profit. AppLovin has grown its revenue from $1.45 billion in 2020 to $5.48 billion in 2025. It also reported an adjusted EBITDA margin of 84% last year. Now AppLovin is applying that same AI playbook to e-commerce. Instead of helping game developers find players, the system is helping online retailers find shoppers.
AppLovin has turned to e-commerce for growthShutterstock
The company began rolling out its e-commerce advertising tools roughly 18 months ago. It started with a broad campaign type, then added “new customer” targeting in late October 2024, and most recently launched “new visitor” campaigns: tools that can drive consumers to a brand’s website even if they’ve never visited before. BofA is bullish on AppLovin stockBofA Securities analyst Omar Dessouky reiterated a “Buy” rating on AppLovin stock with a $705 price target.The investment bank projects AppLovin’s e-commerce net revenue will climb from roughly $34 million in the fourth quarter of 2025 to around $90 million in the first quarter of 2026. More Tech Stocks:Bank of America resets Nvidia stock forecast after meeting with CFOGoldman Sachs resets Broadcom stock forecastBank of America resets Amazon stock forecastThe increase in e-commerce sales is tied to new ad volume. According to BofA, around 2,000 new advertisers will go live on AppLovin’s platform in Q1, fueled in part by the company’s referral-based self-service launch that began in Q4 2025.For context, AppLovin noted that over 3,000 new pixel installs, the tracking tags that advertisers use to connect their websites to the AppLovin system, occurred in Q4. Each new pixel is effectively a new advertiser entering the funnel. More advertisers mean more data for AppLovin’s AI model, and more data means better predictions. Better predictions mean better returns for advertisers, which drives even more spending.It’s a flywheel. And it’s just starting to spin for e-commerce.BofA estimates total first-quarter revenue of $1.813 billion. The company guided for Q1 sales between $1.745 billion and $1.775 billion. AppLovin’s own management was clear on its earnings call: gaming strength remains the primary engine of first-quarter sequential growth, with e-commerce still building toward scale.Is APP stock undervalued?AppLovin’s growth story is far from over. Analysts tracking the ad-tech stock forecast revenue to increase to $17.34 billion in 2030, indicating a compounded annual growth rate of over 17%. Its free cash flow is projected to expand from $3.95 billion in 2025 to $14.46 billion in 2030. Over the next five years, AppLovin’s FCF margin is estimated to widen from 72% to 83%, which is exceptional.If APP stock is priced at 25x forward FCF, which is in line with its historical average, it could be valued at a market cap of $361 billion, indicating an upside potential of almost 120% from current levels. AppLovin CEO Adam Foroughi has been direct about the long game. The company currently converts only about 1.3% of the ad impressions it serves into revenue. When the model has a high-confidence signal, say, a gamer who’s likely to switch games, that conversion rate jumps above 5%. The gap between those two numbers represents the entire opportunity. As AppLovin adds more e-commerce advertisers, the AI has more ways to match users to relevant products, pushing that overall conversion rate higher.Foroughi stated:”This powerful technology, which inevitably is going to get much better over time, is going to be able to serve a different product in every single ad impression.”According to a report from Investing.com:Evercore ISI maintains an Outperform rating and sets a $750 price target, citing strength in gaming advertising. Wells Fargo recently raised its price target to $560, bumping Q1 revenue estimates 3% above consensus.Out of the 22 analysts covering APP stock, 19 recommend “Buy,” and three recommend “Hold”. The average AppLovin stock price target is $642, 22% above the current price. The broader message from Wall Street: AppLovin’s path from gaming powerhouse to diversified performance advertising giant is intact and Q1 may be the quarter when e-commerce starts making that case in the numbers.Related: Bank of America goes all in on controversial tech