AppLovin Stock Slumps After Analyst Warns Of Potential Q4 Shortfall: Retail Mood Flips To Negative

AppLovin Corp. (APP) shares fell sharply on Tuesday as traders reacted to subpar predictions regarding the app marketing platform’s fourth-quarter results.

BofA Securities analyst Omar Dessouky said the firm’s 3P estimates suggest a 4% quarter-over-quarter (QoQ) decline in the Palo Alto-based company’s fourth-quarter app revenues, TheFly reported. This compares to the 2% growth the Street currently models.

The analyst said this is despite the U.S. mobile gaming market returning to growth after two consecutive years of year-over-year (YoY) declines.

According to BofA, AppLovin's sequential decline will likely surprise investors, as the fourth quarter typically marks the peak season in mobile gaming.

The brokerage said the gaming portfolio’s weakness by itself may not be a concern but it introduces a nuance to the fourth-quarter setup. BofA added that it isn’t clear whether the management had factored in normal seasonality in its consolidated fourth-quarter guidance.

Following the release of third-quarter results in early November, AppLovin guided to fourth-quarter revenue of $1.24 billion to $1.26 billion versus the then-average analysts’ estimate of $1.19 billion. The consensus has since then moved up to $1.26 billion.

The company also expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between $740 million and $760 million, with a corresponding margin of 60%.

 He noted that the estimates are based on BofA’s tracking of monthly In-App Purchase (IAP) revenues of 500+ mobile games across five video game stocks it covers. 

BofA has a Buy rating on AppLovin stock, with a price target of $375.

APP sentiment and message volume January 7, 2025,  as of 2:36 pm ET | Source: Stocktwits

On Stocktwits, retail sentiment toward AppLovin stock flipped to ‘bearish’ (26/100), the lowest since mid-November, from ‘bullish’ a day ago. Message volume improved to ‘high’ levels.

A watcher of AppLovin on the platform said the stock and Palantir are two ideal shorting candidates.

Another user warned of a 20% plunge if the stock cannot hold support around $312.

AppLovin stock jumped 713% in 2024. At last check, the stock was down 7.36% at $328.82.

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