AppLovin Stock Up 85%. Learn Whether To Bet Against $APP

Core Viewpoint - AppLovin's stock has experienced significant volatility, with an 85% increase in 2025, but faced a 14% drop on one day due to an SEC investigation, before recovering to end the day up 7.6% [2][3]. Company Performance - AppLovin's market capitalization has soared 700% in 2024 and nearly doubled to $230 billion in 2025, driven by its role in helping mobile app developers find users and sell advertising [12]. - The company reported a 77% increase in revenue to $1.26 billion and a 164% increase in net income to $189.5 million for the quarter ending June 2025, resulting in a net profit margin of 65% [17]. Regulatory Concerns - The SEC is investigating AppLovin's data collection practices, prompted by whistleblower complaints and short-seller reports alleging violations of service agreements [10][11]. - Short sellers have raised concerns about AppLovin's methods, including accusations of unauthorized data harvesting, which could lead to regulatory sanctions if proven valid [14][13]. Market Sentiment - Citigroup and Oppenheimer have reiterated buy recommendations for AppLovin, suggesting that the market may have overreacted to the SEC investigation news [3]. - Despite the positive outlook from some analysts, there are concerns about the potential impact of regulatory changes on the company's business model and growth trajectory [5]. Competitive Landscape - AppLovin is expanding its advertising services from mobile games to the broader e-commerce market, which is significantly larger but also competitive, facing rivals like Meta and Google [17]. - The company's AXON 2.0 advertising optimization service is a key driver of its growth, enabling developers to reduce costs and increase profitability [17]. Valuation and Risk Factors - AppLovin's valuation metrics are significantly higher than the S&P 500, with a price-to-sales ratio of 43.8, price-to-free cash flow of 67.8, and price-to-earnings of 83.6 [18]. - The stock has a high beta of 2.53, indicating greater volatility compared to the overall market, exemplified by its recent price fluctuations [18]. - Insider selling has raised concerns, with over $514 million in shares sold by corporate insiders in the past three months, potentially signaling a lack of confidence among leadership [18].