AppLovin (APP) has come a long way from its starting point in mobile gaming. Once known for its gaming app portfolio, the company slowly pivoted to focus on digital advertising technology, and that gamble has paid off handsomely. Using AI and machine learning, AppLovin has transformed itself into a major player in the ad tech space, helping companies maximize ad revenue while improving user engagement. With its growing dominance in digital ads, AppLovin has delivered impressive numbers in the last seven quarters.
Its Q4 2024 earnings are just the latest proof of its momentum. The company surpassed analysts’ expectations again, posting earnings per share (EPS) of $1.73, well above the forecasted $1.25, with revenue of $1.37 billion, a 44% jump from the previous year. However, ‘no one expects the Spanish inquisition,’ and so, a short-seller decided to rain on AppLovin’s parade.
Short-Seller to Rain on the Parade
Edwin Dorsey, the man behind “The Bear Cave” newsletter, recently accused AppLovin of engaging in deceptive advertising practices, claiming that some of the company’s ads were “predatory” and “unreadable or unclickable.” His scathing report caused some drama and triggered an 11% drop in APP stock.
So far, the company has remained tight-lipped. Wall Street analysts, however, don’t seem to be jumping ship. Many still maintain a “Strong Buy” rating on the stock, with price targets suggesting plenty of upside. On the other hand, investors are different animals, and they were quick (as always) to react. Perhaps some investors are worried about regulatory scrutiny, while others see this as just another case of a short-seller looking to make a quick profit.
Regardless, AppLovin has set ambitious goals for 2025 with plans to double down on AI-driven ad personalization, making its platform even more efficient for advertisers. The company is also in the process of diversifying its app business to sharpen its focus on advertising. Financially, it aims to keep revenue growth high gear while improving margins. If AppLovin stays the course, it could prove that this short-seller’s storm is nothing more than passing clouds.
Tipranks’ Smart Score
AppLovin’s stock has an 8 on the Smart Score, indicating expected market outperformance. Analysts recommend buying the stock, and blogger sentiment is bullish at 70%, slightly above the sector average. Hedge funds reduced holdings by 303.7K last quarter, and insiders sold $3.5 billion in shares over the past three months. Crowd wisdom is very positive, with technical indicators showing a 12-month change of 649.38%. Fundamentals appear solid, with a return on equity of 134.52% and asset growth of 9.52%.
Is APP Stock a Good Buy?
On Wall Street, AppLovin is considered a strong Buy, with an average price target of $539.88, implying a 29.99% upside potential.
