APP Stock On Track For 9-Day Losing Streak After Unity Ad Dispute Ruling — Wedbush Flags Competitive Shift

Wedbush analyst Alicia Reese said the ruling highlights a “conspicuous” competitive shift as Unity’s advertising business gains traction and could pressure AppLovin’s MAX take rate.

• Reese also pointed to Unity’s recent advertising growth as an important backdrop to the dispute. 
• AppLovin stock was on track for a ninth straight session of losses and a 16-month low, with shares down about 9.5% for the week.
• AppLovin alleges Unity’s Ad Quality SDK collects data tied to ads served through MAX and may have used that information in its own models.

AppLovin (APP) stock fell in early morning trade on Friday, on track to hit a fresh one-year low amid an eight-day losing streak, after a San Francisco court denied the company’s request for a temporary restraining order against Unity (U) Software’s Ad Quality SDK.

In a note to investors cited by TheFly, Wedbush analyst Alicia Reese said the ruling highlights a “conspicuous” competitive shift as Unity’s advertising business gains traction. She also stated that stronger Unity bidding within AppLovin’s MAX auctions could create a headwind for the company’s take rate.

"It's easy to assume that AppLovin wouldn't resort to a legal case if its competitors aren't gaining ground," she wrote. 

APP Stock Hits 17-Month Low

APP stock slid nearly 4% in the opening trade and was the top-trending ticker on Stocktwits at the time of writing. The shares are on track to post their biggest weekly fall since August, down around 9.5% so far this week. 

If the losses hold, the stock will mark its ninth straight session of declines. At the opening bell, the stock hit a 17-month low.

AppLovin, Unity Fight Over Advertising Data

AppLovin alleges Unity’s Ad Quality SDK collects data tied to ads served through its MAX platform, including information related to creatives, users, devices, revenue and engagement. AppLovin claims Unity may have used that information in its own models to compete in mobile advertising auctions.

The company sought to block Unity from collecting what it calls “Protected Data” and asked the court to require changes to the software.

Unity disputes the allegations, arguing that Ad Quality is a publisher-authorized tool designed to identify harmful ads and does not violate the companies’ bidding agreement. The company has characterized AppLovin’s legal action as an attempt by a dominant incumbent to respond to increased competition.

AppLovin has not proven its allegations in court.

Unity’s Ad Business Gains Ground

Reese pointed to Unity’s recent advertising growth as an important backdrop to the dispute. She noted that Unity’s Vector revenue increased 23% sequentially in the second quarter, roughly twice the company’s guidance, and reached a $1 billion annualized run rate two quarters ahead of schedule. Strategic Grow revenue increased 63% year over year.

Reese said she does not expect the dispute to affect AppLovin’s underlying AXON performance, but stronger Unity bidding could pressure MAX economics.

She also stated that AppLovin is unlikely to restrict Unity’s access to MAX because doing so could hurt publisher yields and potentially create an antitrust argument for Unity.

How Is Retail Feeling About APP Stock?

On Stocktwits, retail sentiment around APP stock rose to ‘extremely bullish’ from ‘bullish’ territory over the past day. 

One retail trader described the latest decline as a potential final leg lower before consolidation, while another stated that the market was pricing in a sharp deterioration across AppLovin’s businesses and discounted the company’s competitive advantages.

View this Stocktwits post

View this Stocktwits post

APP stock has fallen nearly 60% this year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<