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AppLovin vs. Unity Software: Which Mobile App Stock is a Better Pick?

The mobile app ecosystem has developed rapidly with greater penetration of smartphones and the increase in mobile gaming. Due to the pandemic, user engagement has risen rapidly as more users
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The post AppLovin vs. Unity Software: Which Mobile.

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The mobile app ecosystem has developed rapidly with greater penetration of smartphones and the increase in mobile gaming. Due to the pandemic, user engagement has risen rapidly as more users play mobile games.

According to an RBC Capital report, the mobile gaming total addressable market (TAM) was worth $91 billion last year, representing more than half of the total global gaming market, which is worth $175 billion.

Using the TipRanks Stock Comparison tool, let's compare two mobile app companies, AppLovin and Unity Software, and see how Wall Street analysts feel about these stocks.

I am neutral about both stocks mentioned in this article.

AppLovin Corp. (APP)

AppLovin Corp. provides software solutions with advanced tools for mobile app developers that enable developers to monetize, market, analyze and publish their apps. The company generates revenues from two sources: business clients and consumers.

Business clients made up 46% of the company’s total revenues, while consumer clients made up the remaining 54% in Q2.

In the second quarter, revenues soared 123% year-over-year to $669 million, surpassing analysts’ estimates of $640.5 million. Diluted earnings came in at $0.04 per share, in line with a consensus estimate of $0.04 per share.

Adam Foroughi, CEO and co-founder of AppLovin said, “Our strong execution and growth this quarter, in spite of anticipated industry headwinds around data privacy, speaks to the tremendous opportunity ahead of us and to the distinct advantages leveraging our ML-based software and proprietary first-party insights to help clients grow.” (See AppLovin stock chart on TipRanks)

The company did not give any guidance for FY21 or Q3, and Applovin’s CEO elaborated on that on its earnings call, saying, “But we decided financial guidance should match the way we operate, and we'll update those annually for you all, unless we're going to diverge materially from that guidance.”

APP uses a metric called total software transaction value (TSTV) “to measure the scale and growth rates of our software platform,” as the company’s revenue from its business software platform is from third-party clients using APP’s software platform to search for new clients.

TSTV is calculated by adding back "eliminated intercompany revenue from owned and operated marketing spend.”

In Q2, the company’s TSTV grew four times year-over-year to an annual run rate of around $900 million.

J.P. Morgan analyst Alexia S. Quadrani was of the view that this rise in TSTV compared favorably with the fiscal performance of Unity Software’s (U) Operate solutions business and highlighted “the strength of its platform amid significant changes to the mobile ecosystem.”

The analyst reiterated a Buy and a price target of $83 (7.3% upside) on the stock.

Analyst Quadrani found it interesting that APP plans to launch more “evergreen” titles in the second half of the year. AppLovin defines “evergreen” titles that can generate annual recurring revenues in excess of $100 million.

The analyst believes that APP could scale these gaming titles rapidly with a significant rise in user acquisition costs. “We note these evergreen games were not assumed in prior guidance, creating upside to consensus estimates should the company execute,” Quadrani added.

According to the analyst, APP has used its “strong competitive position in mobile user acquisition and monetization to successfully integrate into games publishing, creating a closed ecosystem of services and content akin to large technology platforms.”

Moreover, Quadrani believes that the stock can “generate strong shareholder returns without multiple expansion.”

Turning to the rest of the Street, analysts are bullish about AppLovin, with a Strong Buy consensus rating, based on 4 Buys and 1 Hold.

The average AppLovin price target of $79 implies 2.1% upside potential from current levels.

Unity Software (U)

Unity is a platform that provides two sets of solutions: Create Solutions and Operate Solutions. Create Solutions provides a comprehensive portfolio of software solutions for developers to create 2D and 3D content that can be deployed on more than twenty platforms, including Microsoft Windows (MSFT) and Apple’s (AAPL) Mac.

Unity’s Operate Solutions offers app developers a set of solutions to grow and monetize their end-user base. The company competes with AppLovin through the Operate Solutions business.

Interestingly, Unity is also one of APP’s partners and enterprise client.

In Q2, Unity posted revenues of $273.6 million, a jump of 48% year-over-year, surpassing the Street’s estimates of $243.07 million. Revenue from Operate Solutions grew 63% year-over-year to $182.9 million.

The company’s loss per share narrowed to $0.02 per share, from a loss of $0.09 reported in the same quarter last year. Analysts had estimated a loss of $0.13 per share. (See Unity Software stock chart on TipRanks)

Luis Visoso, Unity Software’s CFO said, “While our strong performance is broad based, we are particularly proud of the performance from our Operate Solutions group that expanded market share in a tough environment. Our strong performance gives us confidence to raise guidance for the year, again.”

Unity Software expects its Q3 revenues to be in the range of $260 million to $265 million, while for FY21, the company expects revenues to be in the range of $1.04 billion to $1.06 billion.

Interestingly, the company is looking at increasing momentum beyond gaming industries. In Q2, the company added three new automotive manufacturers and three consumer product companies as its customers.

Macquarie analyst Tim Nollen believes that the company’s software can be applied across different industries for “various aspects of design” and is “instrumental in building the future state of the internet – the metaverse. We think it is truly unique and puts the company in a strong position amid converging secular trends in mobile, gaming, and advertising.”

Moreover, according to Nollen, the total addressable market (TAM) for Unity “is both exponential and hard to quantify, though it starts at $80bn and we see its penetration rate well under 5%.”

Indeed, Unity’s management said on its earnings call, “In gaming, on the create side, we enjoyed a share exceeding 50% overall of the year ending 2020. And as you know, our market share is even higher in the fastest growing subsegments of mobile gaming in VR/AR [virtual reality/ augmented reality].”

Analyst Nollen is of the view that this market share is five times the market share of Unity’s closest competitor. The analyst initiated coverage with a Buy rating and a price target of $152 (12.5% upside) on the stock late last month.

Turning to the rest of the Street, analysts are bullish about Unity Software, with a Strong Buy consensus rating, based on 10 Buys and 2 Holds.

The average Unity Software price target of $137.55 implies 1.8% upside potential from current levels.

Bottom Line

While analysts are bullish about both stocks, based on the upside potential over the next 12 months, AppLovin seems to be a better Buy.

Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article​.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance

The post AppLovin vs. Unity Software: Which Mobile App Stock is a Better Pick? appeared first on TipRanks Financial Blog.

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International

The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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Spread & Containment

A major cruise line is testing a monthly subscription service

The Cruise Scarlet Summer Season Pass was designed with remote workers in mind.

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While going on a cruise once meant disconnecting from the world when between ports because any WiFi available aboard was glitchy and expensive, advances in technology over the last decade have enabled millions to not only stay in touch with home but even work remotely.

With such remote workers and digital nomads in mind, Virgin Voyages has designed a monthly pass that gives those who want to work from the seas a WFH setup on its Scarlet Lady ship — while the latter acronym usually means "work from home," the cruise line is advertising as "work from the helm.”

Related: Royal Caribbean shares a warning with passengers

"Inspired by Richard Branson's belief and track record that brilliant work is best paired with a hearty dose of fun, we're welcoming Sailors on board Scarlet Lady for a full month to help them achieve that perfect work-life balance," Virgin Voyages said in announcing its new promotion. "Take a vacation away from your monotonous work-from-home set up (sorry, but…not sorry) and start taking calls from your private balcony overlooking the Mediterranean sea."

A man looks through his phone while sitting in a hot tub on a cruise ship.

Shutterstock

This is how much it'll cost you to work from a cruise ship for a month

While the single most important feature for successful work at sea — WiFi — is already available for free on Virgin cruises, the new Scarlet Summer Season Pass includes a faster connection, a $10 daily coffee credit, access to a private rooftop, and other member-only areas as well as wash and fold laundry service that Virgin advertises as a perk that will allow one to concentrate on work

More Travel:

The pass starts at $9,990 for a two-guest cabin and is available for four monthlong cruises departing in June, July, August, and September — each departs from ports such as Barcelona, Marseille, and Palma de Mallorca and spends four weeks touring around the Mediterranean.

Longer cruises are becoming more common, here's why

The new pass is essentially a version of an upgraded cruise package with additional perks but is specifically tailored to those who plan on working from the ship as an opportunity to market to them.

"Stay connected to your work with the fastest at-sea internet in the biz when you want and log-off to let the exquisite landscape of the Mediterranean inspire you when you need," reads the promotional material for the pass.

Amid the rise of remote work post-pandemic, cruise lines have been seeing growing interest in longer journeys in which many of the passengers not just vacation in the traditional sense but work from a mobile office.

In 2023, Turkish cruise line operator Miray even started selling cabins on a three-year tour around the world but the endeavor hit the rocks after one of the engineers declared the MV Gemini ship the company planned to use for the journey "unseaworthy" and the cruise ship line dealt with a PR scandal that ultimately sank the project before it could take off.

While three years at sea would have set a record as the longest cruise journey on the market, companies such as Royal Caribbean  (RCL) (both with its namesake brand and its Celebrity Cruises line) have been offering increasingly long cruises that serve as many people’s temporary homes and cross through multiple continents.

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