Is the app undervalued? Where is the opportunity? Recently, I have reviewed AppLovin (APP) again and my conclusion is that the current APP has entered a valuation range worthy of serious study, but whether it is undervalued is determined by whether E-commerce can successfully open the second growth curve. 1. The stock price has halved, but has the fundamentals deteriorated? The APP has retreated nearly 60% from its peak, but the company's fundamentals have not deteriorated synchronously. The revenue for Q2 2026 is approximately 1.92B, a year-on-year increase of 53%. Net Income is approximately 1.27B, a year-on-year increase of 55%. Adjusted EBITDA is approximately 1.61B, a year-on-year increase of 58%, with a margin of up to 84%. So it is a company that maintains around 50% growth while also having strong profitability and cash flow. The market is currently concerned about whether the future growth rate can be maintained. The app has experienced growth rates of 60% -70% or even higher in the past, but the management has repeatedly mentioned that the long-term more realistic growth center is around 30%+. So the market is now trading Growth Deceleration in advance, repricing the app from a super growth stock to a mature growth stock. 2. P/E has reached its lowest historical range From historical data, the median P/E of the app is about 50x, but now it has dropped to around 23x, basically reaching the lowest level since the company achieved stable profitability. Forward P/E has increased by more than ten times according to different calibers. The APP has now been pushed to the bottom of the historical valuation range. For a company that maintains high growth, with an adjusted EBITDA margin of over 80% and strong FCF, this valuation is quite attractive. But I think the biggest opportunity for the app is that the market may underestimate its potential for future TAM expansion. The real moat of an app is AXON The true core asset of an APP is actually the AXON advertising prediction system. After the advertiser places the advertisement, AXON will continuously learn which users are most likely to generate consumption based on installation, purchase, conversion and other data, and then search for more similar users. The higher the Prediction Accuracy, the better the ROAS of the advertiser, and the budget will naturally continue to increase. This is also the strongest aspect of Performance Advertising: if advertisers can consistently earn more money with just $1, they don't need the app's sales team to persuade them, and ROI will drive the advertising budget to continuously expand. So the real moat of an app is AXON's Prediction Accuracy. 4. Second growth curve: E-commerce The problem is that AXON's main service in the past was Mobile Gaming. This market has good profits, but TAM is not large enough, and relying solely on mobile game advertising is difficult to support the APP's long-term market value of hundreds of billions of dollars or even higher. So the current strategy of the app is to expand the same advertising engine beyond gaming, such as e-commerce, DTC Brand, and the entire consumer advertising market. If AXON can prove that it can not only help mobile game companies acquire players, but also help clothing, beauty, consumer goods, and e-commerce brands reduce CAC and increase ROAS, then the TAM in front of the app will be completely changed. The management believes that Non gaming Opportunities can reach 5-10 times higher than Gaming, which is the core of the second round of valuation reassessment in the future. Recently, some Early Signals have started to appear. Some e-commerce brands started testing their apps at a few hundred dollars per day and quickly increased their budgets to tens of thousands or even tens of thousands of dollars, without significantly deteriorating their CAC while expanding their spend. Of course, an advertiser cannot prove that e-commerce has been successful. But if more and more advertisers show similar results in the future, it means that AXON is equally effective outside of gaming. This is what I think is the most worth tracking data for the next few quarters. How much is the APP worth? Read three scripts Bear Case is the case where E-commerce ultimately did not emerge, and the growth rate of Gaming continued to decline, with long-term growth dropping to 15% -20%. It is not surprising that the market only offers 15-20 times P/E in this situation for a long time. The Base Case is when E-commerce begins to contribute incremental growth, and the company maintains a long-term growth rate of 25% -30% while maintaining extremely high margins and FCF. According to this script, the current valuation has begun to become attractive. The Bull Case is that if the APP can continue to demonstrate growth in the number of E-commerce Advertisers, increase in Spend, and excellent CAC/ROAS performance in the coming quarters, while the proportion of Non gaming Revenue continues to increase, then the market's definition of APP may change from Mobile Gaming AdTech to AI powered Performance Advertising Platform. If the market re believes that apps can maintain long-term growth of over 30%, then it is not particularly exaggerated to regain valuations of 30x, 35x, or even higher in the future. This is currently the biggest Asymmetrical Upside of the app. 6. My trading plan: Don't guess the bottom, pay more attention as you get closer to the Value Zone I won't assume that $300 is definitely the bottom just because the app has dropped a lot. But I think we have already entered the Value Zone here. I will start paying attention and laying out in batches around 300. 285-290 is the first tier position that I am more interested in. If the extreme situation reaches a gap of 270-275 or even 240, and the company's fundamentals and e-commerce data do not deteriorate, I believe the risk/reward will further increase. Waiting for the opportunity to buy at the bottom on the left side, only buying spot goods. Next, I will mainly focus on a few things: the number of e-commerce advertisers Non-gaming Spend、 Can the CAC/ROAS and Revenue Growth of the advertiser after scaling ultimately stabilize at around 30%, and can EBITDA and FCF continue to remain strong.