A year ago, an on-device multimedia technology company Digital turbine (NASDAQ:APPLICATIONS) was a non-starter on Wall Street. The company was on virtually no one’s radar and the APPS share price was in penny stock territory below $ 5. Since then, the business has caught fire, and APPS stock has soared to $ 75. It was one of the biggest Wall Street gatherings in recent memory – and no one saw it coming.
Well, hardly anyone.
In InvestorPlace’s financial bulletin The daily 10X stock report – which aims to deliver to your inbox, every day, a selection of stocks that could increase by at least 10X – I alerted subscribers in early June that APPS stock was a solid buy with huge upside potential.
The course of action at the time? Below $ 10. The APPS share price today? About $ 75. Our readers got a breathtaking result 650% gain in that broken stock, in just seven months.
The Digital Turbine stock was not their only big winner.
Since May, The Daily 10X subscribers have seen gains as high as 1,600% in Nio (NYSE:NIO), 1.700% in Connect the power (NASDAQ:PLUG), 1,200% in SpiritMedicine (OTCMKTS:MMEDF), 775% in Sunworks (NASDAQ:SUNW), and 700% in Flashing charge (NASDAQ:BLNK).
The average gain on all the choices? A breathtaking 110% (to find out more about this newsletter which generates life-changing wealth every day, Click here).
But back to the APPS action, I think this great rally is far from over. Indeed, I think this title will surpass the $ 100 level in 2021.
APPS Stock: A Quick Look at Digital Turbines
Before going much further, let’s start by understanding the business model of the digital turbine.
I like to think of the company as pioneering a targeted advertising model for mobile app developers. Here is what it means.
Digital Turbine has a core software platform, DT Ignite, which is built into phones manufactured by its OEM partners (like Samsung) and / or deployed under its partner wireless carriers (like Verizon).
Before consumers open these phones, Digital Turbine’s Dynamic Installs software pre-installs apps on the phones (called Native App Preloads). Once consumers open these phones, DT’s setup assistant asks consumers if they want to install different apps. Then, once consumers use those phones, DT’s platform leverages user data to directly suggest and / or install apps related to consumer interests.
It is basically a targeted advertising platform, for apps, preinstalled on phones.
This model may seem boring. Who wants pre-downloaded apps on their phone? But it is also pure genius.
Traditionally, most of Digital Turbine’s revenue has come from the dynamic installations business. This is a fully prepaid business. And while consumers may not appreciate that their phones come with apps preinstalled, Verizon, AT&T, Samsung, and Lenovo won’t stop doing it because it is a very lucrative business opportunity for them. (If you’re an app maker, the hardest thing to do is get consumers to install your app, and you would pay an arm and a leg to have DT Ignite overcome this hurdle for you).
At the same time, most people will not take down the DT platform. For various reasons. First, many consumers don’t want to take the time to uninstall software. Second, they might not know how to do this. Third, they might genuinely appreciate data-driven app recommendations, just as many people genuinely like data-driven Facebook ads.
In this sense, Digital Turbine’s business model is a winner.
But it wasn’t until 2020 that Wall Street realized it – and that’s why the APPS stock suddenly took off like a rocket.
The solid benefits of the digital turbine
You may have noticed. The stock of APPPS is flying higher today. At the time of this writing, it has increased by about 15%.
Why? Because Digital Turbine just released some bestselling third quarter numbers, which largely underscore that the company’s app advertising model is gaining momentum.
I’ll let the numbers speak here.
In fiscal 2020, Digital Turbine’s revenues increased by 34%. In the first quarter of fiscal 2021, they increased by 93%. At the end of the second quarter, Digital Turbine’s revenue growth rate accelerated to 116%. In this most recent earnings release, Digital Turbine reported revenue growth of 146%.
It doesn’t take a rocket scientist to connect these dots.
Digital Turbine’s growth rates have slipped from 34% to 93%, to 116% to 146% in the past year, a sign that: 1) Consumers are spending more time than ever on their phones and in apps, and 2) businesses get ready to pay money to have their apps programmatically installed on users’ phones.
This is the good news.
The best news? This story of growth is a story that begins.
Revolutionary business transformation
When I first reviewed the business about a year ago, Digital Turbine was an app advertising company. That is, the company made more than 80% of its revenue from its dynamic installations business which programmatically installed apps on users’ phones.
But Digital Turbine has since undergone a revolutionary transformation.
In the last quarter, dynamic installations represented less than 50% of sales. The remaining 50% came from the company’s various new technology and content products, such as SingleTap (which allows app developers to integrate one-click download functionality on phones).
Revenue from these products grew more than 500% year-on-year in the third quarter.
In essence, Digital Turbine has transformed over the past year from an app advertising company to an app technology company, creating a suite of products and services to help app developers. to create, market and distribute their applications.
This transformation is clearly working wonders, as evidenced by the six-fold increase in non-DI revenues during the last quarter.
Ultimately, a strong early signal on this groundbreaking transformation creates a trail for the APPS stock to move significantly higher, both over the next several months and years.
Long track ahead for digital turbine stock
There are approximately 3.5 billion smartphone users on planet Earth. Only 570 million of them are equipped with Digital Turbine software.
That’s 16% penetration.
There really is no reason that number cannot grow to 50% or more in the next few years. Application advertising is clearly a high value added function, and Digital Turbine is the clear leader in application advertising, with a significant competitive advantage through powerful network effects. Additionally, everyone will have a smartphone at some point, which means that the number of smartphone users around the world will trend towards 7 billion over time.
Net net, Digital Turbine has a clear track record of 570 million phones installed today, to over 3 billion phones in the future.
Assuming the company does, my modeling suggests that Digital Turbine is on track to generate over $ 2.5 billion in revenue by 2030, with earnings of around $ 8 per share.
Based on a futures earnings multiple of 25X, this implies a 2029 price target for the APPS stock of $ 200. Reduced by 8% per year, that implies a 2021 price target for APPS stock above $ 100.
Net result on the stock of APPS
The stock of digital turbines came out of nowhere (except for The Daily 10X subscribers, who have grown 650% on the name in just seven months).
But, now that the APPS stock is on everyone’s radar, the rally will only intensify. Next stop? $ 100.
At the time of publication, Luke Lango had (directly or indirectly) no position in any of the stocks mentioned in this article.
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