AppLovin stock tumbled Thursday after a prominent short seller issued a negative report on the app marketing firm.
Muddy Waters Research announced on social network X that it has taken a short position in AppLovin. In a research note, Muddy Waters said AppLovin is at risk of being deplatformed because of questionable business practices.
The firm claims that AppLovin misappropriates user data on third-party platforms in violation of the terms of service for those platforms. It estimates that 52% of AppLovin's e-commerce conversions are retargeting.
"We estimate only (about) 25% to (about) 35% of sales are incremental. CEO claims e-com incrementality near 100%. We believe e-com business will never take off," Muddy Waters said on X.
Supporting that view, the firm observed 776 AppLovin e-commerce clients in the first quarter and saw about 23% churn. "We suspect e-com clients are understanding that APP is in reality low ROAS (return on ad spend)," Muddy Waters said.
On the stock market today, AppLovin stock plunged 20.1% to close at 261.70.
AppLovin did not immediately response to a request for comment.
AppLovin stock has been a frequent target of short sellers. In late February, three short sellers published inflammatory reports on the company: Culper Research, Fuzzy Panda Research and The Bear Cave newsletter. AppLovin disputed those claims.
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.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
