[music] Stocks, bonds, ETFs, straight out of downtown Chicago. This is [music] Zach's Market Edge. Welcome to Zach's Market Edge, the podcast about investing in your life.I'm your host, Tracy Reinik, and this week I'm going solo to talk about the software stocks once again. We did look at these stocks a couple of weeks ago, but before everything happened with the Iran war. So, I wanted to look at them again.Are they values or are they traps. We've gotten the earnings in on these stocks as well. So, at least ...

Core Viewpoint - AppLovin (APP) has been identified as a new short idea by Hedgeye, indicating a potential downside of 30% [4] Company Analysis - Hedgeye analyst Andrew Freedman emphasized that AppLovin's competitive advantage is not primarily its machine learning model (AXON), but rather its mediation platform (MAX) [4]

Core Viewpoint - Noveris Health Sciences Inc. is currently facing a trading halt imposed by the British Columbia Securities Commission due to unusual trading activity and has clarified misinformation regarding its FDA registration status [1][2]. Group 1: Trading Halt - The British Columbia Securities Commission issued an order halting all trading in Noveris Health Sciences Inc.'s securities until April 16, 2026, due to unexplained fluctuations in trading volume and market price [1]. - The company intends to cooperate fully with the BCSC to meet any conditions necessary for the resumption of trading [3]. Group 2: Clarification on Misinformation - Noveris Health Sciences Inc. has not authorized or been involved in the creation or distribution of an article by John Michaels, which inaccurately claimed that the company is FDA-registered [2]. - The company confirms it has no registrations with the FDA and is not pursuing any applications for registration for its products at this time [2]. Group 3: Company Overview - Noveris Health Sciences Inc. is a biotechnology company focused on developing innovative medications and therapies for mental health disorders, including nicotine addiction and PTSD [4]. - The company's strategy combines advanced technology with a robust infrastructure for drug discovery and development, aiming to create breakthrough treatment solutions [4]. - Noveris is also focusing on the next generation of psychedelic medicine, developing innovative compounds with significant therapeutic potential through clinical trials [4].

Core Insights - AppLovin has faced significant challenges at the beginning of the year, indicating a rougher outlook for the company [1] Company Summary - AppLovin's performance has deteriorated, suggesting that the company is struggling to navigate the current market conditions [1] Industry Summary - The difficulties faced by AppLovin may reflect broader trends within the industry, highlighting potential vulnerabilities in the market [1]

Core Insights - The primary focus for AppLovin Corporation (APP) is its exceptional margin strength, which is a key competitive advantage alongside its growth in the advertising ecosystem through performance-based tools and AI-driven optimization [1] Financial Performance - A significant portion of revenue is now derived from higher-margin software offerings, enhancing profitability and allowing a larger share of incremental revenue to contribute directly to profit, which underscores the durability and quality of AppLovin's business model [2] - In the latest quarter, AppLovin achieved an adjusted EBITDA margin of 84%, an increase of 700 basis points year-over-year, while the net income margin improved by 600 basis points to 66%, indicating strong operational efficiency [2] Investment Flexibility - The robust financial profile provides AppLovin with the flexibility to invest in long-term growth areas such as AI innovation, platform enhancements, and balance-sheet optimization, which is crucial in the volatile ad-tech sector [3] Market Sentiment - The recent decline in AppLovin's stock price appears to be influenced more by market sentiment rather than any fundamental weaknesses in the business, suggesting that temporary valuation resets may present attractive entry points for investors [4] Competitive Positioning - Compared to peers like The Trade Desk (TTD) and Unity Software (U), AppLovin's focus on performance and efficiency, along with its margin stability, differentiates it in the advertising ecosystem [5][6] - AppLovin's stock has decreased by 67% over the past year, contrasting with a 15.5% decline in the industry, highlighting its unique margin stability amidst broader market challenges [7] Valuation Metrics - AppLovin trades at a forward price-to-earnings ratio of 25.69, which is above the industry average of 22.47, indicating a relatively higher valuation compared to its peers [8]

Core Viewpoint - AppLovin's stock has declined 47% from its 52-week high due to slower growth in its e-commerce advertising segment, with brands facing scaling challenges and creative production bottlenecks despite the use of AI tools [2][5][8]. Group 1: Company Performance - AppLovin has transitioned from a mobile gaming ad specialist to a broader marketing technology player, experiencing significant revenue growth and market share expansion [7]. - The company's stock has seen a sharp decline, reflecting investor skepticism regarding the sustainability of its growth amid increasing competition and doubts about the real-world effectiveness of AI [5][8]. - Recent industry checks indicate that e-commerce advertisers are reducing spending and struggling to scale profitably on AppLovin's platform, which threatens the company's recovery prospects [3][9][12]. Group 2: E-commerce Advertising Challenges - E-commerce advertising budgets have been softer than expected, with brands reporting difficulties in scaling and a lack of new customer acquisitions [9][10]. - Advertisers are encountering a "scale wall," where initial spending yields good returns, but efficiency diminishes as budgets increase [10][11]. - Creative production remains a bottleneck, limiting the ability to generate high-performing ads necessary for growth, despite positive feedback on generative AI tools [11][12]. Group 3: Future Outlook - AppLovin's reliance on e-commerce for future growth is critical, as challenges in this sector could lead to direct revenue headwinds [12][13]. - Investors had anticipated a rebound driven by AI advancements, but current trends suggest that the necessary advertisers are hitting efficiency limits sooner than expected [13][18]. - While AppLovin has strong fundamentals, it must demonstrate progress in navigating the evolving digital advertising landscape to avoid being perceived as a value trap [14][18].

Core Insights - The digital advertising landscape is experiencing subdued momentum, with e-commerce advertisers reducing spending and facing challenges in scaling profitably on platforms like AppLovin [1][7][11] - AppLovin's stock has declined approximately 47% from its 52-week high, reflecting investor skepticism regarding AI hype, increased competition, and concerns about sustainable growth [6][8][12] - The company is encountering significant scaling issues, where initial advertising budgets yield solid returns, but efficiency diminishes as spending increases, leading to a "scale wall" [9][10] Industry Trends - The e-commerce advertising sector is maturing, with brands pulling budgets from certain platforms and struggling to achieve profitable scaling, which poses direct revenue challenges for AppLovin [5][11][15] - The era of easy scaling and high returns in digital advertising is coming to an end, necessitating platforms to demonstrate consistent value delivery at scale [15][18] - There is a growing need for transparency around segment-specific growth drivers and creative production bottlenecks, as well as detailed AI integration roadmaps to reassure investors [17][18] Company Performance - AppLovin has transitioned from a mobile gaming ad specialist to a broader marketing technology player, leveraging its AI-powered advertising platform to achieve significant revenue gains [4][6] - Despite strong fundamentals, including a proven AI engine and diversified revenue streams, the company must navigate the challenges of a maturing market to maintain its growth trajectory [14][18] - The current environment requires AppLovin to prove its ability to adapt and thrive amidst rising competition and changing advertiser expectations [12][15]

Company Overview - AppLovin's stock has experienced a significant decline, down 9.8% as of 10:52 a.m. ET, contributing to a total drop of 38% over the past six months [1][4] - The decline is attributed to broader market pessimism regarding the economy and geopolitical issues, rather than any specific company news [2][6] Economic Context - Concerns about the global economic impact of the ongoing war in Iran have heightened, with rising oil prices and increased recession odds in the U.S. [3] - A recent OECD report indicates that U.S. inflation could reach 4.2% this year, significantly above the Federal Reserve's estimate of 2.7% [3] Industry Challenges - The software sector, including AppLovin, has faced challenges in 2026 as investors assess the potential negative impacts of artificial intelligence on various companies [5] - Despite AppLovin's strong fourth-quarter results, with sales increasing by 66% and net income rising by 84%, investor sentiment remains cautious due to fears of AI disruption [5][6] Market Sentiment - AppLovin shareholders are increasingly pessimistic, reflecting concerns over the company's vulnerability in a rapidly evolving AI landscape [4][6] - The company's stock performance has led analysts to exclude AppLovin from their recommendations for top investment opportunities [8]

Core Viewpoint - AppLovin's stock is experiencing significant downward pressure due to short-seller allegations regarding market competition, compounded by broader market pullbacks related to geopolitical tensions [2][3]. Financial Performance - AppLovin reported Q4 2025 revenue of $1.66 billion, exceeding estimates by 3.35%, and achieved $3.95 billion in annual free cash flow, marking an 89% year-over-year increase [7]. Insider Selling - Recent insider selling has raised concerns among investors, with CEO Adam Foroughi selling shares in 44 transactions on March 11 and 12, at prices between $449 and $481 per share, and Director Eduardo Vivas disposing of over 130,000 shares on March 16, at prices between $446 and $465 [5][6]. Market Sentiment - The combination of insider selling and competitive pressures has led short sellers to argue that AppLovin's premium valuation is difficult to justify, with 155 insider transactions recorded in the three months ending March 26, showing minimal buying activity to counterbalance the selling [6]. Growth Potential - The central debate revolves around whether AppLovin's AI-powered advertising platform represents a sustainable growth opportunity in the tech sector or if the stock has been overvalued due to short-term market sentiment [4].

Core Insights - The Amplify Video Game Leaders ETF (GAMR) underwent a significant rebalance in March, involving 22 constituent adjustments aimed at capturing a shifting global landscape and reinforcing core gaming fundamentals [1] Group 1: Changes in Holdings - The rebalance included a notable shift from U.S.-listed shares of NetEase, Inc. (NTES) to Hong Kong-listed shares (9999) at a 2.5% weight, indicating a preference for local listings for international companies [2] - Bilibili Inc (9626) was added to the portfolio at a 2.5% weight, enhancing exposure to digital entertainment platforms linked to gaming and streaming [2] Group 2: Weight Adjustments - Electronic Arts (EA) saw a weight increase of 2.16%, bringing its total to 5.0%, while Unity Software (U) increased by 1.32% to a 2.5% stake, reflecting renewed confidence in gaming industry architects [3] - AppLovin (APP) and Sea Ltd (SE) were both allocated 5.0%, emphasizing the importance of mobile and monetization platforms in the gaming model [4] Group 3: Trimming of Megacap Holdings - The rebalance involved trimming positions in top-performing holdings like Nvidia (NVDA) and Meta Platforms (META), both reduced to a capped weight of 10.0%, and Roblox (RBLX) trimmed to 2.5% [5] - The adjustments reflect a normalization phase after significant gains in AI-driven and platform-centric companies, with Nexon being removed from the index [6] Group 4: Industry Trends - The March rebalance indicates a strategic rotation within the gaming ETF landscape, reallocating gains from megacap tech leaders towards a more diversified mix of gaming publishers, development platforms, and mobile-first companies [7] - The shift towards local listings highlights the increasing significance of global market structures in index construction [7]