Outstanding performance but stock price crashes! AppLovin(APP.US) plunges 20% due to AI and competitor concerns, analysts shout: The moat is still there

The Cailian Press APP learned that despite reporting quarterly results and guidance that exceeded expectations, AppLovin (APP.US) still fell 19.68% on Thursday. The market is concerned about the crowded artificial intelligence sector, and Meta (META.US), Google (GOOGL.US), and CloudX are increasing their investments in in-game advertising, which may weaken AppLovin’s advantages. However, most analysts remain optimistic, believing that growth drivers such as e-commerce self-service platforms have yet to be fully unleashed.

Morgan Stanley analyst Matthew Koster’s team stated in a research report: "Regarding Meta, the company emphasizes that its Audience Network has always been a long-term bidding partner on the supply side of AppLovin’s advertising, and the incremental bidding for IDFA traffic is not a new variable.

More importantly, AppLovin believes that the current competitive landscape is completely different from five years ago (during Meta’s dominance)—its improved advertising effectiveness and closed-loop data advantages have built a moat."

Morgan Stanley maintains an “Overweight” rating with a target price lowered from $800 to $720.

“We are currently focused on the ramp-up of e-commerce business in the first half of 2026 and the full rollout of web self-service tools. With AppLovin’s current valuation at 17 times 2027 EBITDA, if e-commerce and web advertising can break through, they will be key catalysts for valuation increases and profit upgrades in 2026 and beyond,” Koster added.

Jefferies also maintains a “Buy” rating, with the target price lowered from $860 to $700. The firm pointed out that the continued sell-off of gaming stocks is mainly due to “AI risk being priced indiscriminately.”

Analyst James Hini’s team said: "The self-serve universal advertising tools are still scheduled to launch in the first half of this year, but apps are taking a cautious approach to scaling e-commerce rather than rushing to go live. The ROI (LTV/CAC) for new advertisers over 30 days is solid, but the conversion rate of qualified leads is only 57%, indicating significant room for optimization.

The current bottleneck is insufficient video creative capacity, which restricts ad volume growth for advertisers. AppLovin plans to launch GenAI creative tools in the coming months. Management believes this move could boost conversion rates to 70%-80%, making the full deployment of universal advertising tools more timely."

AppLovin CEO and co-founder Adam Foroughi addressed the competition directly at the earnings conference.

“As you have seen over the past few years, new competitors have repeatedly appeared in the MAX bidding system. Unity (U.US) has grown through Vector, Liftoff launched Cortex and quickly scaled, Moloco continues to expand, and last year we also introduced it into bidding. Google has shifted to a bidding model. Every market has its confusions—under the dynamic bidding system, competition should be eroding AppLovin’s barriers. But you have never seen this happen.”

“There are two reasons: first, we are large and sufficiently professional; second, each impression has vastly different value. Our model has an outstanding advantage in assessing the true value of impressions,” he added.

Competitor Unity continued its decline, falling 26% on Wednesday and another 8.2% on Thursday.