SerpApi.Org
Key Points
AppLovin continued to report strong growth.
Meta is moving into a key market.
The stock's valuation has gotten much more reasonable.
AppLovin (NASDAQ: APP) has been one of the biggest winners on the stock market since 2022 as the company has gone from a mobile-game maker to an adtech powerhouse after leveraging the ad tools it built inside its games.
Its ad business has been so successful that it sold off its mobile games business last year and is now a pure-play adtech company. However, the AI boom has brought a mixed bag for the company, and it's been pressured by the broader worries about disruption in the software sector. AI is a key component of Axon, its AI-powered advertising engine, but investors also seem to believe its competitive advantage is more vulnerable as AI tools become more widely embraced.
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As a result, the stock slipped 24% through the first half of the year, according to data from S&P Global Market Intelligence. As you can see from the chart below, the stock pulled back in the first two months of the year, and then mostly traded sideways.
What's happening with AppLovin
A number of factors weighed on the stock to start the year. It faced a short-seller attack from CapitalWatch, which alleged that the company was avoiding typical anti-money-laundering controls and being financially unscrupulous in other ways. The company pushed back on the claims, calling them "false, misleading, and nonsensical." It's also faced similar short reports in the past, though none of the allegations have stuck.
Additionally, mobile game-related stocks initially fell after Google announced Project Genie, a new platform for AI game creation, which potentially threatens the app-based game ecosystem, which includes AppLovin, as much of its business comes from ads that run on mobile games.
AppLovin then plunged in February after it reported fourth-quarter earnings, even though it beat estimates. Revenue jumped 66% to $1.66 billion, and earnings per share nearly doubled to $3.24.
Nonetheless, the results were not enough to push the stock higher, especially due to signs that Meta Platforms was planning on competing for untracked ad traffic on Apple's iOS that it had historically ignored.
AppLovin redeemed itself in the first-quarter report in May as the stock moved up 6% after another round of strong results and rapid growth.
What's next for AppLovin
Despite fears about disruption from AI, Meta, or other weaknesses, AppLovin has continued to deliver impressive results. It generates blockbuster profit margins, a sign of competitive advantage, and it has begun repurchasing stock, showing management confidence in future growth.
If AppLovin maintains its current momentum, the stock will eventually bounce back.
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Jeremy Bowman has positions in AppLovin and Meta Platforms. The Motley Fool has positions in and recommends Apple and Meta Platforms. The Motley Fool has a disclosure policy.
