We just published the list of the 10 Best and Cheap Stocks to Buy Heading into 2027 and AppLovin (NASDAQ:APP) ranks 9th on this list.
Wall Street’s AI trade took a hard hit on October 30. Reuters reported that a selloff in tech shares pushed MSCI’s global index down 1.5%, after results from Intel and Amazon showed how much cash AI spending is burning. Intel fell 28.6%, and the Philadelphia semiconductor index lost more than 7%, its biggest one-day drop since late June. Alphabet’s shares had already slid 12.6% a day earlier, after it reported that its AI spending pushed its cash flow negative.
The nervousness had been building. Reuters reported on October 15 that South Korea’s KOSPI index, home to some of the world’s largest chipmakers, fell roughly 8% in a single session. Saxo Bank chief investment strategist Charu Chanana said the Asian selloff looked less like a sudden deterioration in technology fundamentals and more like a repricing of the cost of capital.
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Rates are a large part of that story. Bloomberg reported on October 4 that benchmark 10-year Treasury yields sat near 5.3%, and Franklin Templeton Institute head market strategist Chris Galipeau said the conversation would change if they reached 6%. Bloomberg Intelligence analyst Robert Schiffman added that hyperscalers such as Meta, Amazon, Alphabet, Microsoft and Oracle now have cash needs far beyond what they generate, which pushes them toward debt markets.
AppLovin made our list of the best and cheap stocks to buy for two reasons. First, its forward P/E is 12 and expected revenue growth rate for 2027 is nearly 29%. Second, it is one of the most popular stocks among hedge funds which is why APP is one of the best cheap stocks to buy according to hedge funds.
AppLovin’s revenue grew 53% from a year earlier in the second quarter, and its adjusted EBITDA margin reached 84%, yet the stock fell sharply because revenue landed just below the company’s own guidance. Management said the shortfall came from a slower pace of improvements to the advertising models that match app advertisers with users, not from weaker demand from advertisers.
The next round of model improvements arrived right after the quarter ended and is already live, according to chief executive Adam Foroughi. The company guided to third-quarter revenue growth of 46% to 48%, even after allowing for the higher computing costs of training bigger models. Chief financial officer Matt Stumpf said AppLovin spends on that computing only when it expects extra revenue in return, and that margins should stay near current levels over the long run.