AppLovin Corp. (NASDAQ:APP) shares are falling Tuesday after BofA Securities downgraded the stock from Buy to Neutral and cut its price target to $400 from $430.
- AppLovin shares are approaching critical lows. Why is APP stock at lows?
AppLovin Stock Drops On BofA Downgrade
AppLovin shares dropped after BofA analyst Omar Dessouky downgraded the stock, citing increased risk to the company’s long-term growth targets. Dessouky said the risks to AppLovin’s 30% year-over-year long-term revenue growth trajectory, which includes the Consumer segment, have increased.
Dessouky reduced the price target on AppLovin to $400 from $430, a cut of 6.98%. The new target still represents 17.99% upside from AppLovin’s current price of $339.
BofA’s Omar Dessouky Flags Risk To AppLovin’s Growth Drivers
Dessouky said engineer-directed improvements to AppLovin’s gaming models drove most of the company’s quarter-over-quarter growth after its second-quarter results. Dessouky expressed AppLovin did not explicitly address the future trajectory of its self-learning growth rate during the recent earnings print, in its third-quarter guidance or in any commentary since.
AppLovin’s Market Share Lead Raises Long-Term Growth Concerns
Dessouky estimated AppLovin’s relative market share at twice that of its next-largest competitor. He said this high market share position means AppLovin’s 3% to 5% quarter-over-quarter self-learning growth rate may no longer apply on its own.
Dessouky said most of the market had assumed self-learning growth was a given. He said AppLovin achieves that growth by continuously retraining its predictive models on live impression data. Dessouky stated this retraining continued in the second quarter even though engineer-directed improvements were lighter than normal.
APP Shares Are Dropping
APP Price Action: Applovin shares were down 5.53% at $320.25 at the time of publication on Tuesday. The stock is trading at a new 52-week low, according to Benzinga Pro.
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