1. Mobile advertising

The last two months or so have been pretty rough for AppLovin (NASDAQ:APP) shareholders. The mobile advertising and app monetisation platform has seen its valuation pulverised by almost 40% since the start of 2026, driven by a combination of AI disruption and competitive pressure concerns.

However, the analyst team at Jefferies has taken a contrarian stance and now sees tremendous value on offer.

It believes concerns about competitive threats from CloudX and Meta Audience Network have been blown out of proportion lately. And with the shares now trading at just 15 times projected EBITDA for its 2027 despite revenue, and profits still growing at a 50%+ rate, it’s easy to see why these experts are excited.

Of course, there’s always the risk that Jefferies’ dismissal of competing platforms is misguided. With the business going up against some heavy hitters like Meta, AppLovin’s earnings growth could start decelerating if it fails to protect and capture more market share.

Nevertheless, with investors seemingly pricing in this expected slowdown, AppLovin shares could deliver some surprise gains if management continues to grow the business in spite of pressure from its rivals. That’s why I think this US stock deserves a deeper dive.

2. Meeting natural gas demand

Another stock that’s come onto Jefferies radar has very little to do with tech. And that’s Antero Resources (NYSE:AR).

Jefferies’ thesis has less to do with recent stock price volatility and more to do with market underpricing versus long-term potential.

Global demand for liquefied natural gas (LNG) is expected to increase significantly over the coming years as energy grids worldwide scale up their electricity generation capacity. And as one of the largest natural gas producers in the US, the business is nicely positioned to benefit from this long-term tailwind.

The Energy Information Administration (EIA) has projected that 2027 could be an inflexion point where demand outstrips supply.

In this scenario, the price of natural gas is expected to start climbing again. And it’s this inflexion point that Antero’s management team is aiming to capitalise on through aggressive investments to boost daily production volumes throughout 2026. And with the shares trading at just 11 times forward earnings, the market may have overlooked this incoming potential earnings surge.

Of course, just like AppLovin, Jefferies’ analysts aren’t blind to the risks. With other oil & gas producers looking to take advantage and ramp up production, the EIA’s prophecy may not be fulfilled. And if this results in excess supply, natural gas prices could end up falling instead of rising, directly harming Antero’s profit margins.

But is that a risk worth taking? At today’s valuation, it might be. That’s why, just like AppLovin, I think this is a US stock worth investing further.

Yet, these aren’t the only two investments I’ve got my eye on right now.

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Currently, my most successful investment ever is in US software company AppLovin (NASDAQ:APP). The company’s up around 1,500% from my first buy and actually remains one of my daughter’s largest holdings. So, what made it such a great pick?

The value proposition

I bought shares in AppLovin for the first time around two years ago. According to my notes, the stock was trading around 43 times earnings from the previous 12 months but just 14 times earnings for the forward year.

This pointed towards the company’s impressive growth trajectory. Earnings growth was projected at 150% and evidence suggested this wasn’t a one-off or just a good year.

Unsurprisingly, it was about artificial intelligence (AI). The company had just released a new AI model that made app monetisation much more effective — it didn’t open the apps but provided the software for development, advertising and monetisation.

This resulted in a forward earnings per share growth rate that was around 45%. In other words, analysts expected earnings to increase by this much annually over the medium term. The price-to-earnings-to-growth ratio was around 0.5, indicating severely undervalued conditions.

Hold your winners

I’ve not always been the best at holding my winners. I remember selling BAE Systems shares before Russia invaded Ukraine and pocketing a 30% gain. If I’d held, I’d now be up 400%.

But I’ve held AppLovin through multiple earnings cycles and it just keeps smashing analysts expectations. Momentum has been great and analysts were constantly having to revise their expectations upwards — this is always a great sign.

However, there sometimes comes a point when you have to question the valuation. Once again, the numbers are the most important thing. Because investing is about making probability-weighted decisions.

Today, AppLovin trades at 55 times forward earnings but the average medium-term earnings growth rate is 20%. This gives us a PEG ratio of 2.8. That’s nearly six times higher than when I bought the stock.

To me, this suggests, on a probability-weighted basis, that the stock won’t go much higher. I absolutely could be wrong because AI stocks still have a lot of momentum, but the data tells me it’s at or above fair value.

Lessons learned

I don’t expect to hold AppLovin in the family portfolios I manage for much longer. However, I do hope to put this money to good use as I go forward by applying the same model. The stock market might be a little hot, but there’s certainly more companies to buy today with similar growth prospects and better valuations. And for the record, I don’t believe AppLovin is worth considering today.

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EV battery maker

Of this trio, two were new buys and one was a top-up. The two newbies were CATL and Applovin (NASDAQ:APP).

China’s CATL is the world’s largest electric vehicle (EV) battery maker. In Q2, net profit jumped 34% to 16.5bn yuan ($2.3bn). This is impressive growth given the fragile Chinese economy.

The firm is opening a battery plant in Hungary to expand internationally. And as the world transitions to EVs, CATL’s future looks bright. 

CATL is already listed in China, but went public in Hong Kong in May, raising $5.2bn. However, when considering a stock, I listen to management speak on earnings calls. This helps me build conviction (or not). 

With CATL’s in Chinese, I can’t, so won’t be investing.

Skyrocketing ad-tech stock

Applovin is an ad tech firm that operates an AI-powered platform helping apps monetise more effectively. Growth has been spectacular. In Q2, revenue surged 77% to $1.26bn, while earnings growth was also very strong.

Revenue per installation jumped 70% and installations increased 8%. This means AppLovin earned significantly more per ad served while also reaching more users.

Management said this momentum will continue into Q3, with 59% revenue growth anticipated. The stock has been on fire — up 425% in a year!

Applovin’s AI engine, Axon 2.0, is now optimising advertising campaigns across e-commerce, connected TV, and fintech. These additional verticals significantly extend the total addressable market. 

However, as well as being massive, the global digital ad market is very competitive. Beyond giants like Amazon, Google, Meta, Applovin is also competing with The Trade Desk.

Additionally, three short sellers have accused it of misappropriating user data. While Applovin denies this and continues growing strongly, this issue is at least worth bearing in mind. 

At first glance, the stock looks very pricey at 29 times sales. However, AppLovin is already incredibly profitable. Forecasts put the shares on a forward price-to-earnings (P/E) ratio of around 30 by 2027, which seems more reasonable.

While it might be worth a look, I find the third stock more interesting.

Riding a wave of growth

That is Sea Ltd (NYSE:SE), a Singapore-based tech giant that runs Shopee (e-commerce), Garena (gaming), and SeaMoney (digital finance). Sea is an acronym for Southeast Asia.

When interest rates surged in 2022, the Sea share price crashed 87% in just 12 months. This fall was accelerated by slowing growth following the pandemic’s online shopping boom.  

However, Sea is back on track. In Q2, revenue increased 38% to $5.3bn, with profitability across all three units. 

The biggest risk I see here to Sea’s growth is an economic slowdown in its key Asian markets caused by tariffs.

Longer term, however, e-commerce and digital finance are tipped to boom across the region. Shopee is the largest e-commerce platform in Southeast Asia while management says its hit game Free Fire has become an “evergreen franchise“.

The stock’s trading at 65 times next year’s forecast earnings, but this falls to 31 by 2027. Again, for a high-quality growth company still early in optimising profitability, that’s not bonkers.

I reckon Sea’s worth considering and I’ve put it on my watchlist.

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While I found a handful of candidates, these two didn’t make the cut.

AppLovin

The first is AppLovin (NASDAQ: APP), whose shares soared over 700% last year. However, they’ve crashed 46% since Valentine’s Day. That was a heart-wrenching plunge for shareholders, although the stock is still nearly 300% higher than this time last year!

AppLovin develops adtech software for mobile app developers, helping them monetise their applications. Last year, revenue jumped 43% to $4.71bn, while net profit skyrocketed 343% to $1.58bn.

This profit surge was driven by its AI engine, AXON, which significantly boosted ad targeting performance. It’s also expanded beyond mobile games into e-commerce ads. 

Why the price fall?

However, three separate reports from short sellers in a month have hammered the price. The most recent one from Muddy Waters claimed AppLovin may have been secretly pulling user ID data from platforms like Google, Facebook, Snapchat, and TikTok, potentially violating terms of service. This echoed previous reports that accused the firm of fraudulent activities.

Fuzzy Panda (one of the other short sellers) wrote to the S&P 500 inclusion committee in a bid to keep the company out of the index. It said: “AppLovin’s recent revenue growth has been based in data theft, revenue fraud, and the exploitation of our country’s laws protecting children.”

Now, AppLovin strongly denies these allegations. CEO Adam Foroughi wrote: “The reports are littered with inaccuracies and false assertions.” And inclusion in the S&P 500 might boost AppLovin’s valuation — not what short sellers want, as they stand to benefit when the stock falls.

If it transpires that the company has done nothing wrong, the share price could rebound strongly. Analysts still expect net profit to rise 39% this year. However, given the uncertainty surrounding the business model here, I’m avoiding AppLovin shares.

IonQ

The second stock is IonQ (NYSE: IONQ). This one has also been on a wild ride, soaring 1,200% between early 2023 and the end of 2024, only to plunge 45% this year.

IonQ is focused on developing general-purpose quantum computers and supporting infrastructure. Its technology is accessible through cloud platforms like Amazon Web Services, Microsoft Azure, and Google Cloud, allowing users to experiment and apply quantum computing in their respective fields. 

Quantum computers use the rules of quantum physics to process information in a totally different way from regular computers. If fully realised, they could revolutionise everything from medicine and materials science to cryptography.

IonQ’s revenue surged 95% last year to $43.1m, exceeding its own guidance. Wall Street expects that to nearly double this year, so this is a high-growth stock, for sure. However, profits aren’t expected for years and the price-to-sales multiple is a sky-high 113.

Meanwhile, it faces daunting competition from deep-pocketed tech giants like IBM, Google, and Microsoft. Even AI chip king Nvidia is now entering the quantum computing research space.

IonQ is a fascinating stock, but it’s very speculative. For me, it’s far too early to start picking winners in the quantum space.

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However, while the current US market’s somewhat hard to navigate, quality companies that have been unduly sold off will come back. So here are some stocks worth considering as the market sell-off continues.

Celestica

Celestica (NYSE:CLS) was my highest conviction pick throughout 2024. But the recent sell-off in Celestica’s stock comes amid growing fears surrounding the US-Canada trade tensions, particularly the impact of tariffs.

However, it’s crucial to note that Celestica sources much of its production from Asia. This will minimise the impact of any Canadian-specific tariffs. While concerns about the trade war persist and absolutely could worsen, I believe these fears are overblown, especially as Celestica’s evolving business model increasingly focuses on high-value services, which are less susceptible to tariff disruptions.

Celestica’s recent Q4 2024 report showed impressive growth, with a 19% increase in revenue and a 46% rise in earnings per share (EPS). This beat expectations. Strong demand from hyperscalers and AI-driven infrastructure investments are expected to sustain growth.

Despite this, the stock remains undervalued, with a forward price-to-earnings (P/E) of 17 times and a price-to-earnings-to-growth ratio of 0.55. This suggests the stock is at least 45% undervalued. Given the strong fundamentals and growth outlook, this correction could represent an excellent opportunity to add to my position.

AppLovin

AppLovin (NASDAQ:APP) was another top pick of mine through 2024. Admittedly I incrementally sold my position as it reached 1,000% above my entry point. However, the recent sell-off has been incredibly sharp — falling more than 50% in one month. And at the current level, the stock looks a lot more attractive.

AppLovin is a mobile advertising and marketing platform that helps developers monetise apps through targeted ads and user acquisition strategies. And while its recent success has been driven by AI, it’s likely that the sell-off also reflects concerns about a recession in the US.

Nonetheless, the forecast remains enticing even if there will be some negative adjustments. The stock is currently trading at 33 times forward earnings, which may sound expensive, but with an expected earnings growth rate above 40%, the price-to-earnings-to-growth (PEG) ratio is just 0.75.

The risk here is that a Trump-engendered recession would see companies pull back on their advertising spend, and that could damage the earnings forecast in the near term. This is especially important as the firm pivots away from its traditional gaming market and into the much more lucrative e-commerce space. It’s worth watching closely.

Personally, with the price at $231 in the pre-market, I believe a lot of these risks are priced in. My daughter still has a reduced position in AppLovin, but I may consider re-adding it to my portfolio. After all, it’s a quality company with impressive margins.

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After dropping 45% last July, Crowdstrike hit a new all-time high this week. That equates to growth of almost 90% in less than six months. US tech stocks are known for their growth but a recovery like this is a rare thing indeed.

And yet, shockingly, it’s not the fastest-growing stock in the past six months. Both Palantir and Axon Enterprise outpaced it, up 196% and 112% respectively. 

But the absolute winner of the lot is mobile app development and advertising firm AppLovin (NASDAQ: APP). It’s gained 360% since August last year and a mind-blowing 710% in the past 12 months. I don’t know the exact price history of every stock in the world but I’d be surprised if many have achieved anything close.

For context, it took US tech darling Nvidia around 17 months to achieve similar growth. Palantir recently did the same in about 19 months and at one point Tesla climbed 700% in 20 months, between 2020 and 2022.

So what is AppLovin and why’s it not dominating the news like the others?

Mobile gaming and advertising

Launched in 2012, AppLovin releases mobile games and provides tools for developers to monetise their apps. Disappointingly, the name’s not a play on the character ‘McLovin’ from the 2007 movie Superbad. Until last October, it hadn’t done much to grab attention. In early September, the share price was still down 24% from its all-time high of $112 in late 2021.

Then things started happening rapidly. On 7 November, it posted impressive Q3 results that sent its market-cap soaring above $100bn. Revenue increased 39% in the quarter and earnings per share (EPS) reached $1.25 — far ahead of the expected 92c. Over the past two months, Piper Sandler, Wedbush, JP Morgan, Macquarie and Jefferies have all lifted their price targets for the stock, most giving it a Buy or Outperform rating.

Most recently, Goldman Sachs raised its target from $220 to $335. The stock’s currently trading near $360.

The strong performance isn’t unwarranted. Over the past six consecutive quarters, earnings have beat analyst expectations every year — once by as much as 180% (Q2 2023). Revenue’s not far behind, climbing 125% since 2020 and beating expectations each year without fail.

Worth considering?

While much about AppLovin looks impressive, there are risks to consider. Much of its revenue derives from mobile gaming, a relatively new industry that’s highly competitive and lacks a loyal customer base. And a shift in privacy regulations, in particular GDPR in Europe, could derail the company’s ad-driven revenue model.

Looking at ratios, the price is now 100 times higher than earnings, putting it in highly speculative territory. At that level, the chance of a correction increases dramatically. 

So yes, it’s a fairly new high-flying company that could easily be the next big thing. But it could also be the next big failure. For that reason, it doesn’t appeal to a risk-averse investor like me. However, I’m certainly interested to see where it goes.

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It’s not about dividends, for now

The trick to turning £8,000 into a second income isn’t dividend stocks, it’s about growing our portfolios into something much bigger. In the near term, we have to accept that £8,000 invested in stocks and shares isn’t going to give us a second income worth much more than £600 a year.

However, if we invest wisely in growth-oriented stocks, we could see our £8,000 grow much quicker. Personally, I like to use a data-driven approach, and I invest most of my capital into companies with strong price-to-earnings growth (PEG) ratios.

The PEG ratio is calculated by dividing the forward price-to-earnings (P/E) ratio by the expected annual growth rate of the medium term. For example, AppLovin (NASDAQ:APP) currently trades at 16 times forward earnings, but the expected growth rate is 20% annually. In turn, this gives us a PEG ratio of 0.8. Anything under one is very attractive.

This is the type of stock driving my portfolio forward. In fact, I’m already up 113% on AppLovin. But the secret sauce is compound interest. If I’m reinvesting my returns, my portfolio will grow faster and faster over time.

A little more on AppLovin

AppLovin recently beat earnings estimates for the first quarter of 2024 — it’s the company’s fourth straight earnings beat.

AppLovin empowers mobile app creators to succeed. It provides tools for marketing, advertising, data analysis, and even publishing apps. It also runs Lion Studios, which helps developers build and publish winning mobile games. The firm also invests in other game developers and operates a diverse portfolio of free-to-play mobile games.

Investors may be concerned about the company’s record for revenue growth. It was pretty shaky with revenue annually falling backwards during a couple of quarters in 2022 and 2023.

However, the release of AXON 2.0 appears to be driving the company’s recent surge. The AI engine helps boost customers’ earnings by recommending apps for individuals based on their activities and preferences.

In short, the better AppLovin’s customers do, the better the California-based company does itself. According to management, AXON 2.0 hasn’t been integrated fully by all its gaming clients, suggesting more growth to come.

When is it time for a second income?

When do we stop investing for growth and start taking a second income? Well, that’s up to us individually.

If I were to average a 12% annualised return over the next 20 years, I could turn £8,000 into £87,000. That would be enough to generate a second income worth around £6,960 a year, assuming an 8% dividend yield.

This is just an example. Some analysts may say 12% isn’t easily achievable, but I’d beg to differ.

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Building wealth

If we don’t have a large amount of starting capital, we need to build wealth. And this can take time. So how can we do it? Well, there are several key ingredients.

Firstly, we’re going to need to commit to contributing a proportion of our earnings to an investment account. This is how we fuel the fire. Continuous investment also allows us to smooth out the peaks and troughs of the market. Even £50 a week can really add up over time.

Next, we need to truly understand the importance of reinvesting our earnings. Rather than taking our gains one year to, say, pay for a holiday, I need to keep reinvesting. This allows us to benefit from something called compound returns.

Investing sensibly

Of course, we need to apply ourselves to invest successfully. If we make poor investment decisions, or simply invest in companies we like, we could lose money. That’s why it pays us to make informed investment decisions.

If we’re cautious, we can invest in funds, trusts, or ETFs. Scottish Mortgage is a favourite of mine, delivering annualised returns around 30% over the last decade — the first part of the decade seeing much more growth than the second.

Or we can pick stocks ourselves — the vast majority of my investments are stocks.

The goal, in my case at least, is beating the market. I look for double-digit annualised returns over the long run.

Let’s say I average 10% annualised growth — that’s total returns (dividends and share price growth) — and I’m contributing £50 a week to my portfolio.

It requires patience but, after 30 years, I’d have £452,097. From that point on, the portfolio would be generating £45,209 annually, on average.

One stock for growth

AppLovin (NASDAQ:APP) is one stock that has helped my portfolio beat the market. The stock’s up 356% over 12 months, and despite these huge gains, I’d buy more if it wasn’t already a large part of my portfolio.

Admittedly, AppLovin’s growth trajectory has been fairly unsteady, and that’s a risk. However, things appear to be changing, driven by the company’s release of AXON 2.0 — its artificial intelligence (AI) powered technology.

The US-listed company uses its proprietary technology to help app and platform operators maximise their advertising revenues. AXON 2.0 uses AI to recommend new apps and platforms to users based on their established preferences.

Despite the aforementioned rally, AppLovin still looks undervalued. It’s trading at 16.2 times forward earnings and it has a price-to-earnings-to-growth (PEG) ratio of 0.81. For me, the PEG ratio is a real head-turner.

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So, if I were investing £100 of my money each month, which growth stocks would I invest in for wealth generation? Well, here are two companies I’m backing with my own cash.

GigaCloud Technology

GigaCloud Technology (NASDAQ:GCT) is among the fastest-growing companies I’ve come across. The firm connects furniture manufacturers, predominantly in China, with buyers and resellers in North America and Europe.

And it’s on a roll. In its recently released Q4 results, GigaCloud Technology saw earnings per share reach $0.87, more than double the $0.31 in the fourth quarter of 2022. This was on the back of 95% increase in revenue and 168% increase in operating income.

The firm’s USP lies in its ability to reduce storage costs for large parcel goods, namely furniture, by shipping straight to the end user or reseller. Just picture how much space you need to store unsold furniture in the country in which you intend to sell it. This is why GigaCloud is working. Its drop-shipping and last-miles delivery service has proven incredibly successful.

Of course, it’s not perfect. It lacks the digital reach investors expect from an e-commerce company while geopolitical events and weather issues have heavily impacted shipping in recent months.

However, I find the valuation metrics incredibly attractive. Despite being up 450% over 12 months, the stock trades on a forward price-to-earnings ratio of 12 times. That figure is expected to fall to 9.5 times and 8.1 times in 2025 and 2026 respective, based on analysts’ forecasts.

AppLovin

I’m up 96% on AppLovin (NASDAQ:APP). It’s among my most successful investments at this moment in time. The company helps app and platform operators maximise their advertising revenues through its proprietary technology, and is going through a stellar growth phase.

One downside is that AppLovin’s growth has been unsteady in recent years. In fact, we’ve seen revenue fall sequentially at points. However, it appears that we’re seeing a real turnaround thanks to the recently release of AXON 2.0.

AXON 2.0 uses AI to recommend apps that users will like based on their preferences and previous activity, thus boosting revenue. To date, it seems to be working with consecutive earnings beats, and a lofty expectations for Q1.

Despite the meteoric rise of the share price over the past 12 months, AppLovin still looks cheap. The stock trades at 16.95 times non-GAAP forward earnings, and has a price-to-earnings-to-growth (PEG) ratio of 0.85.

I appreciate the PEG ratio is based on earnings estimates, and estimates can be wrong, but the figure is very attractive.

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Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Kicking things off

Lots of us have a little money set aside. But even in the high interest savings accounts we see today, the gains we’re making are nominal. That’s why I, and millions of other Britons, invest in stocks and shares where the returns can be much greater. More seasoned investors may look to achieve annualised returns around 10%, while a novice investor may look to obtain high single-digit returns over the long run.

So, to kick things off, I’d need to start by opening an investment account, and ideally a Stocks and Shares ISA. This can be done through any major brokerage. And if I were starting with £5,000, I’d be well within the maximum annual ISA allowance — currently £20,000.

And then, I’ve got to be realistic. I can’t turn £5,000 into a significant passive income immediately, and it’s not going to happen overnight. I need to take my time, invest sensibly, and if possible contribute some of my salary to help my portfolio grow.

Compounding

Many of us know about compounding. It the process of our gains or losses being amplified over time. However, sometimes we just need to be reminded as to how impactful it can be if we let our investment build up over time.

As we can see from the below chart, £5,000 of starting capital and £200 of monthly contributions compounds significantly at 10%. After 25 years, I’d have £325,651. Assuming I could obtain a 7% yield at the end of the period, which is possible in the current market, I could earn £22,795 annually as passive income.

Sensible investments

As noted, losses can compound in the wrong direction. So I need to make sensible investments. And contrary to popular opinion, sensible investments can see wild gains — just look at Super Micro, Nvidia, and AppLovin (NASDAQ:APP).

In fact, the latter is still one of my favourite sensible picks. And that’s because the metrics just look great. AppLovin stock has surged 400% over the past 12 months, but it doesn’t look expensive because the business is moving in the right direction.

AppLovin, which helps mobile app developers and operators maximise revenues, registered a 88% increase in revenue in its software platform in the fourth quarter of 2023. 

In turn, this appears to be driven by AXON 2.0. It’s the firm’s latest AI tech that boosts revenues for its clients by recommending apps that users will like based on their user activity.

I’m wary that AppLovin’s growth story hasn’t always been steady. The company has registered negative revenue growth in two quarters over the past two years. However, with AXON leading the way, I think it’s turned a corner.

And other analysts do too. The company’s price-to-earnings-to-growth ratio is just 0.69.

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