AppLovin Short Report Again: What Strategy—Buy the Dip or Go Short?

AI-powered advertising technology company AppLovin (NASDAQ: APP) is under scrutiny following fresh allegations of potentially illegal business practices. On Wednesday, short-seller research firm Fuzzy Panda Research released a report claiming that AppLovin’s Axon 2.0 machine learning algorithm engages in unethical and potentially illegal activities, including:

• Data theft from Meta (formerly Facebook).

• Violations of Apple and Google app store policies.

• Anti-competitive practices that could trigger regulatory intervention.

These claims have rattled investors. Yesterday, AppLovin’s stock was down 3.18% and closed at $320.49, with a 52-week range of $57.40 to $525.15. While the stock is far from its yearly lows, the allegations introduce a layer of uncertainty that could lead to further downside.

AppLovin Corporation (APP)

Investment Perspective: Should You Buy the Dip or Short the Stock?

Reasons to Stay Away (Bearish Case)

1. Regulatory Risks: If Apple, Google, or other authorities investigate and take action, AppLovin could face restrictions, fines, or even bans from key app ecosystems.

2. Short Seller Reports Have Impact: Fuzzy Panda Research has a history of exposing corporate misconduct. If their claims hold weight, AppLovin’s stock could see prolonged declines.

3. High Valuation Concerns: Despite the recent drop, APP remains significantly above its 52-week low, suggesting further downside potential if negative sentiment builds.

4. No Dividends: The stock doesn’t pay dividends, making it unattractive for income investors.

5. Tech Sector Volatility: Given macroeconomic uncertainty, high-growth tech stocks like AppLovin may struggle in a high interest rate environment.

Reasons to Consider Buying the Dip (Bullish Case)

1. Potential Overreaction: Short seller reports can sometimes exaggerate issues, and the market may have overreacted. If AppLovin can refute the allegations, the stock could rebound.

2. Strong Revenue: The company has consistently expanded its advertising and AI-driven services, benefiting from mobile app monetization trends.

3. Past Resilience: AppLovin has faced criticism before and managed to recover, indicating possible long-term strength.

My Take: Avoid for Now

Personally, I wouldn’t buy the stock. The regulatory and ethical concerns introduce too much uncertainty, and I believe AppLovin is overvalued at current levels. While it has fallen, it’s still far from its lows, and without dividends, there’s little incentive to hold long-term unless strong growth justifies its price.

For aggressive traders, shorting might be an option, but it comes with risks—especially if the company successfully counters the allegations. For now, I’d stay on the sidelines and monitor further developments.