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Why Digital Turbine Stock Gained Another 26% in December

What happened

Shares of Digital Turbine (NASDAQ: APPS) gained 25.7% in December, according to data provided by S&P Global Market Intelligence. During the month, the Chamber of Commerce in its home town of Austin, Texas, gave it the Company Culture Award for a mid-size company. But this likely didn't affect the stock. Rather, advertising technology is a hot stock market sector in general, and analysts continued to specifically favor Digital Turbine's potential.

So what

Digital Turbine's software helps companies promote their smartphone and smart-TV apps. The company has deals in place with major telecom companies and its software comes preloaded on many Android phones. That said, the stock shot up at the same time Nikkei Asia reported Apple is increasing iPhone production by 30%.

Of course, iPhones don't run on Android, so the move looks illogical at first. But if Apple increases production, perhaps investors reason that other smartphone manufacturers are also increasing production. Since many of Digital Turbine's deals are new, it's poised to benefit more with more new phone sales.

Image source: Getty Images.

Wall Street is bullish on Digital Turbine's opportunity. According to The Fly, an analyst with Craig-Hallum raised their target price for the stock from $44 per share to $60 per share last month. A Canaccord analyst also maintained a $60 per share price target on Digital Turbine stock in December. Not bad for a stock that started 2020 at just $7.21 per share.

Now what

Ad-tech stocks were hot in general in December. Sell-side ad platform Magnite was up 50% while Perion Network was up 41%. Digital Turbine and these others are off most investors' radars, but in-the-know investors seem content to keep bidding these stocks higher as traditional ad spend transitions toward the more data-driven solutions these companies offer.

Ad-tech stocks like Digital Turbine are undoubtedly on the right side of big trends. But like with any growth stock, investors should make sure they understand the company's business, addressable market, and long-term viability and not just buy in on hype.

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Jon Quast owns shares of Magnite, Inc. The Motley Fool owns shares of and recommends Apple and Magnite, Inc. The Motley Fool has a disclosure policy.


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