APP Stock Drops After Edgewater Says AppLovin Growth Has Stalled, Citi Sees Rapid Client Expansion

Edgewater analyst Joe Wittine expects fourth-quarter revenue growth of 8% to 9% sequentially following fresh channel checks.

• Wittine said Applovin’s core advertising business may be reaching a “functional ceiling.”
• He added that competition could increasingly pressure AppLovin’s net revenue spreads.
• Citi offered a more constructive signal Monday, reporting a 5.1% weekly increase in AppLovin’s global e-commerce client base to 13,105.

AppLovin (APP) shares dropped on Wednesday morning after Edgewater Research said the mobile advertising platform’s market-share expansion has effectively stalled, overshadowing bullish client-growth data from Citi earlier this week.

APP stock fell around 6% in morning trade and was among the top trending tickers on Stocktwits at the time of writing. 

The sharp move comes just two days after Citi said AppLovin’s global e-commerce client base reached 13,105 through Sept. 18, up 5.1% from the prior week. According to TheFly, Citi described the growth as the fastest weekly expansion in five months and maintained a ‘Buy’ rating with a $600 price target.

Edgewater Flags AppLovin Growth Ceiling

In a note to investors cited by Investing.com, Edgewater analyst Joe Wittine offered a more cautious view Wednesday following fresh channel checks. He expects AppLovin’s fourth-quarter revenue to grow just 8% to 9% sequentially, suggesting growth could flatten after several quarters of rapid expansion.

Wittine said AppLovin’s share of wallet and share of voice are no longer consistently increasing from already industry-leading levels. “This is primarily the inevitable result of MAX’s share reaching a functional ceiling,” Wittine said, adding that competition is also increasingly compressing AppLovin’s net revenue spreads.

MAX is AppLovin’s core advertising network, which aggregates in-app advertising supply across mobile gaming and other applications.

How Is Retail Feeling About APP Stock?

Retail sentiment on Stocktwits around Applovin improved to ‘bullish’ from ‘neutral’ territory over the past day. 

Some retail investors viewed the pullback as a potential dip-buying opportunity, while others focused on the longer-term growth question raised by Edgewater.

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APP stock continued to trade near its 52-week low of around $297. The shares have fallen more than 50% this year.

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