Capitalwatch withdraws short-selling report + Wall Street continues to be bullish AppLovin(APP.US) stock stabilizes and rebounds

After a comprehensive retraction of a negative research report targeting the company, a major concern for AppLovin (APP.US) shareholders has been temporarily alleviated. According to the Smart Finance APP, the independent research firm Capitalwatch, which previously issued related allegations, has withdrawn all misconduct accusations against AppLovin and will cease further updates on the company.

Last month, Capitalwatch published a report claiming that AppLovin acts as a “money laundering machine” for Southeast Asian transnational crime groups and questioned its business and financial structure. Subsequently, the firm retracted specific allegations regarding shareholder Hao Tang’s role but maintained skepticism about the company’s overall structure. The latest development shows that Capitalwatch has completely overturned its previous report and told the media it will no longer publish any news related to AppLovin. Notably, earlier this week, the firm also hinted at releasing more “explosive” reports.

In January, AppLovin sent a legal letter to Capitalwatch demanding that it cease such actions, stating that the report contained “absurd and obviously false” allegations. The company has not commented on the latest full retraction.

Regarding stock performance, AppLovin rose 6.44% on Friday to $390.55. On the previous trading day, despite the company reporting strong quarterly results, the stock once plunged 20%. Market analysts point out that concerns over short-selling reports, potential AI disruptions to core game advertising business, and the overall weakness in tech stocks have collectively weighed on the stock.

However, some Wall Street analysts believe the cloud hanging over the company is gradually lifting. Morgan Stanley, in its latest research report, noted that AppLovin’s advertising revenue in Q4 grew 14% quarter-over-quarter, significantly exceeding the company’s previous 12% target. The outperformance was mainly driven by its gaming advertising business.

Morgan Stanley also highlighted potential disruptive risks from AI and competitive pressure from industry giants like Meta Platforms (META.US). Nonetheless, the firm believes that AppLovin’s expanding e-commerce advertising business could remain a key growth catalyst in the future. Due to industry valuation adjustments, Morgan Stanley maintains an “Overweight” rating on the stock and has lowered its target price from $800 to $720. In the report, Morgan Stanley analysts wrote, “Over the past three years, the pace of innovation in AppLovin’s ad targeting technology has made us optimistic about its continued and significant ability to improve the performance of its ad network across various verticals.”

Bank of America also downgraded its first-quarter e-commerce advertising channel forecast but noted that if daily ad spending growth exceeds current assumptions, there is still upside potential for the stock. The firm believes that AppLovin’s dominant position in game advertising provides a solid “bottom” for its valuation. Bank of America Securities maintains a “Buy” rating and has lowered its target price from $780 to $705.