A year ago, on-device media technology company Digital Turbine (NASDAQ:APPS) was a nonstarter on Wall Street. The company was on virtually no one’s radar, and the APPS stock price was sitting in penny stock territory below $5. Since then, the business has caught fire, and APPS stock has soared all the way to $75. It’s been one of the biggest rallies on Wall Street in recent memory — and no one saw it coming.
Well, almost no one.
In InvestorPlace’s financial newsletter The Daily 10X Stock Report — which is aimed at delivering to your inbox, every single day, a stock pick that could rise by at least 10X — I alerted subscribers in early June that APPS stock was a strong buy with huge upside potential.
The stock price at the time? Below $10. The APPS stock price today? Around $75. Our readers have netted a jaw-dropping 650% gain in this breakout stock, in just seven months.
Digital Turbine stock hasn’t been their only big winner.
Since May, The Daily 10X subscribers have scored gains as high as 1,600% in Nio (NYSE:NIO), 1,700% in Plug Power (NASDAQ:PLUG), 1,200% in MindMedicine (OTCMKTS:MMEDF), 775% in Sunworks (NASDAQ:SUNW), and 700% in Blink Charging (NASDAQ:BLNK).
The average gain across all the picks? A jaw-dropping 110% (to read more about this newsletter that is generating life-changing wealth every single day, click here).
But back to APPS stock, I think this big rally is far from over. Indeed, I think this stock will break the $100 level in 2021.
APPS Stock: Quick Digital Turbine Rundown
Before we go much further, let’s first understand the Digital Turbine business model.
I like to the think of the company as pioneering a targeted advertising model for mobile app developers. Here’s what that means.
Digital Turbine has a core software platform, DT Ignite, which gets built into phones that are made by its partner OEMs (like Samsung) and/or deployed under its partner wireless carriers (like Verizon).
Before consumers ever open those phones, Digital Turbine’s Dynamic Installs software pre-installs apps onto the phones (called Native App Preloads). Once consumers open those phones, DT’s Set Up Wizard asks consumers if they want to install various different apps. Then, once consumers operate those phones, DT’s platform leverages user data to suggest and/or directly install apps related to the consumer’s interests.
It’s basically a targeted advertising platform, for apps, pre-installed onto phones.
This model might sound annoying. Who wants apps predownloaded on their phone? But, it’s also pure genius.
Traditionally, most of Digital Turbine’s revenues come from the Dynamic Installs business. This is an entirely pre-paid business. And while consumers might not like their phones coming packaged with pre-installed apps, the likes of Verizon, AT&T, Samsung and Lenovo aren’t going to stop doing it because it’s a highly 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’d pay an arm and a leg for DT Ignite to conquer that hurdle for you).
At the same time, most people won’t delete the DT platform. For a variety of reasons. One, many consumers don’t want to take the time to uninstall the software. Two, they might not know how to do that. Three, they might actually enjoy the data-driven app recommendations, just like many people actually enjoy data-driven Facebook ads.
In this sense, Digital Turbine’s business model is a winning one.
But it wasn’t until 2020 that Wall Street realized this — and that’s why APPS stock has, all the sudden, taken off like a rocket ship.
Digital Turbine’s Strong Earnings
You may have noticed. APPS stock is flying higher today. As of this writing, it’s up about 15%.
Why? Because Digital Turbine just reported blockbuster third-quarter numbers, which broadly underscore that this company’s app advertising model is gaining significant momentum.
I’ll let the numbers do the talking here.
In fiscal 2020, Digital Turbine’s revenues rose 34%. In the first quarter of fiscal 2021, they rose 93%. When the second quarter rolled around, Digital Turbine’s revenue growth rate accelerated to 116%. In this most recent earnings release, Digital Turbine’s reported 146% revenue growth.
It doesn’t take a rocket scientist to connect those dots.
Digital Turbine’s growth rates have trended from 34%, to 93%, to 116%, to 146%, over the past year, in a sign that: 1) consumers are spending more time than ever on their phones and in apps, and 2) businesses are warming up to the idea of paying money to have their apps programmatically installed on user phones.
That’s the good news.
The better news? This growth story is story getting started.
Breakthrough Business Transformation
When I first looked at the company about a year ago, Digital Turbine was an app advertising company. That is, the company was pulling in over 80% of its revenues from its Dynamic Installs business that programmatically installed apps on user phones.
But Digital Turbine has since undergone a breakthrough transformation.
This past quarter, Dynamic Installs comprised less than 50% of revenue. The other 50% came from the company’s various new technology and content products, such as SingleTap (which allows app developers to integrate single tap download functionality on phones).
Revenue from these products grew by more than 500% year-over-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 make, market, and distribute their apps.
This transformation is clearly working wonders, as evidenced by the six-fold increase in non-DI revenue this past quarter.
Ultimately, strong early signal on this breakthrough transformation creates a runway for APPS stock to head significantly higher, both over the next few months and next few years.
Long Runway Ahead for Digital Turbine Stock
There are about 3.5 billion smartphone users on the planet Earth. Only 570 million of them have Digital Turbine software installed on them.
That’s 16% penetration.
There really is no reason that number can’t shoot up to 50% or higher over the next several years. App advertising is clearly a high value-add function, and Digital Turbine is the unrivaled leader in app advertising, with a large competitive advantage through powerful network effects. Plus, everyone at some point will have a smartphone, meaning that the number of smartphone users globally will trends towards 7 billion over time.
Net net, Digital Turbine has a clear runway from 570 million installed phones today, to 3-plus billion phones in the future.
Assuming the company does do that, my modeling suggests that Digital Turbine is on track to do over $2.5 billion in revenues by 2030, with profits of about $8 per share.
Based on a 25X forward earnings multiple, that implies a 2029 price target for APPS stock of $200. Discounted back by 8% per year, that implies a 2021 price target for APPS stock of over $100.
Bottom Line on APPS Stock
Digital Turbine stock came out of nowhere (except for The Daily 10X subscribers, who are up a cool 650% on the name in just seven months).
But, now that APPS stock is on everyone’s radar, the rally is only going to heat up. Next stop? $100.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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