AI advertising platform AppLovin’s stock soared dramatically and then dropped after a scathing report claimed issues in the company.
The tech company helps developers – mostly from mobile gaming businesses – market and monetise their apps.
AppLovin shares soared over the past year, with the firm’s stock reaching a record high on February 14 after releasing its positive Q4 earnings report – closing at $510.13 from $280.32 two days earlier.
This share hike smashed analyst estimates.
Last Thursday, however, the company’s stock plunged 8.9 percent after Substack newsletter The Bear Cave released a report outlining potential company flaws.
“Investors believe AppLovin’s ad network business is a beautiful one, as it has extremely high margins, low marginal costs, becomes more effective as it grows, and can one day serve as a growing royalty on the mobile gaming ecosystem. The Bear Cave sees things differently,” the publication’s author Edwin Dorsey wrote.
“The Bear Cave believes AppLovin’s rapid rise — up 750 percent 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,” he said.
The report also accused the platform of potential fraud.
Analysts say AppLovin’s stock drop was also impacted by a positive report from rival Unity Software.
The Palo Alto, California headquartered firm has drawn attention from investors over the past 12 months, being the most successful tech stock in the US last year – rising more than 700 percent.
The company’s stock has risen even more over the past couple of months – hiking 900 percent from a year ago.
AppLovin was founded in 2012 by Adam Foroughi, John Krystynak, and Andrew Karam as a marketing tech firm that helps businesses improve their mobile app reach.
With most of its customers in the gaming industry, the company helps developers optimise adverts and uses AI to gain insights into user behaviour through its platforms MAX, AppDiscovery, and SparkLabs.
