AppLovin stock has whipsawed in the past week, surging on quarterly earnings then tumbling on a negative report and rising competition.
AppLovin stock rocketed to a record high of 525.15 on Feb. 13 after the app marketing platform delivered a big beat-and-raise report for the fourth quarter. It closed at 510.13 on Feb. 14, up 34.1% over two days.
But on Thursday, AppLovin stock plunged 8.9% to close at 450.01 after The Bear Cave newsletter exposed potential problems with the company.
"The Bear Cave believes AppLovin's rapid rise — up ~750% over the last year to around 35x revenue — is fueled by low-quality revenue growth from ads that are deceptive, predatory, and at times unreadable or unclickable," Edwin Dorsey, author of the The Bear Cave newsletter, said in a report.
AppLovin did not respond to a request for comment.
AppLovin stock also was pressured by a positive report from rival Unity Software. Unity stock broke out of a cup base at a buy point of 28.67 on Friday after posting its fourth-quarter results early Thursday.
On the stock market today, Unity stock rose 1.2% to close at 28.34. AppLovin stock fell 7.7% to close at 415.31.
AppLovin Stock Gets Price-Target Hikes
Meanwhile, several Wall Street firms raised their price targets on AppLovin stock this week.
On Wednesday, Citi reiterated its buy rating on AppLovin stock and upped its price target to 600 from 460. In a client note, Citi called the launch of Unity's new advertising technology solution a small risk for AppLovin.
On Thursday, Loop Capital maintained its buy rating on AppLovin stock and increased its price target to 650 from 450.
On Friday, Benchmark Equity Research reiterated its buy rating on AppLovin and raised its price target to 525 from 375.
In a client note, Benchmark analyst Mike Hickey said the pullback in AppLovin stock creates a buying opportunity. He said the market's reaction to Unity's new AI-driven ad platform, Unity Vector, is "overdone."
"While some investors fear competitive pressures on APP's ad model, we believe this reaction is unwarranted," Hickey said. "Unity's relaunch is an ambitious, multi-quarter transformation with unproven results, whereas APP's ad platform is already well established, high-margin, and scaling effectively."
AppLovin's software platform enables app developers to market, monetize and analyze their apps. The company also has expanded into advertising-based e-commerce and streaming television services.
APP Stock Is On Three IBD Lists
AppLovin has a dominant position in mobile advertising and it will take time for Unity to ramp its new ad tech platform, Hickey said.
"While Unity's efforts signal a more competitive landscape over the long term, the company is effectively starting over in ad monetization and must prove its ability to scale," he said. "APP, on the other hand, has already built a sophisticated, high-converting ad ecosystem with significant AI-driven optimizations."
AppLovin is on three IBD stock lists: Leaderboard, Big Cap 20 and Tech Leaders.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
