Digital Turbine (NASDAQ:APPS) A Highly Volatile Buy

While stocks have always had a certain volatility to them, these days, volatility seems to be almost par for the course. We've seen some stocks explode with value, with 1,000% gains no longer just a pipe dream. One company that's seen some staggering gains—and a few less-staggering losses—is Digital Turbine (NASDAQ: APPS), a company that's delivered a lot of value, but not without some hiccups along the way.

Flat for Years, Then Suddenly Explosive

Looking at Digital Turbine's charts for the last five years is a head-shaker by any definition. From mid-2015 clear to 2019, the company was unable to break the $3 mark with a sledgehammer. Then, around February 2019, something fundamentally changed Digital Turbine's makeup, and the company started an upward climb.

It was slow at first, breaking that $3 mark in February, but then breaking the $4 mark in May 2019. It then climbed to its first pinnacle of $8.88 in November 2019, before another reversal struck the company and started it back down. The company then, like so many others before it, ran headlong into the coronavirus sell-off.

After April 3, though, another and much more explosive upward trajectory kicked in. In the space between April 3 and August 21, the company's value was up roughly eight-fold, going from $3.83 on April 3 to a high of $28.04 on August 21. It has, in the week since, given back some of those gains, but is still several times higher than its recent coronavirus low.

A Heavy Slate of Recommendations

The incredible gains seen in Digital Turbine aren't lost on the analyst community. Our own research on the company points to a consensus of “buy,” based on word from 11 separate firms. With just two at a “hold” rating compared to seven with a “buy”, that does suggest confidence in the stock as a whole. Several companies have even recently modified their ratings, with TheStreet going from a “C” rating to a “B-”.

Price targets are likewise varied, as is commonly the case, and right now the average is sitting at $20.83. Given that that's about $1.87 below its Thursday close, further volatility is likely to be expected from this company.

The Numbers Lend Some Hope

All of this starts to looking like a mystery, but a closer consideration of Digital Turbine and what it does makes things a little clearer. Digital Turbine—as you may have figured from the ticker symbol—is an advertising platform that focuses on mobile apps. The word out of the company's fiscal first quarter, which ended back on August 6, saw revenue go to $59 million, which was significantly better than consensus estimates of $48.5 million. That put net income to $0.13 per share, which was well above consensus estimates of $0.09 per share.

With the company reporting that its Application Media software had picked up over 43 million new installations over the quarter, it was clear that Digital Turbine was catching on, and in a big way. With reports coming in from companies like Zynga (NASDAQ: ZNGA), it's clear that the lack of mobility we saw in Digital Turbine's fiscal first-quarter didn't impact the use of mobile apps all that much.

With mobile still proving one of the best advertising platforms around thanks to growing user numbers overall and the increasing number of use cases—free-to-play games supported by advertising, for example—it's easy to see where the trend could continue. Digital Turbine believes this as well, with second-quarter guidance pointing to between $59 million and $61 million in revenue. Analysts are currently expecting $51.4 million in sales, which suggests another leg up for the company could be arriving with the next set of quarterly figures.

There are some dangers here, of course; a general downturn in advertising like the kind we saw back in April is entirely possible, especially if more coronavirus lockdowns kick in ahead of the election or beyond. Given the numbers we've seen lately on that front, though, coupled with growing coronavirus treatment options, this is unlikely. For right now, conditions are looking good for Digital Turbine to keep right on spinning and putting up impressive numbers in the process.