Stone Fox Capital
Founder, CIO & Portfolio Manager of Stone Fox Capital
AppLovin's slight revenue miss should drive momentum traders out of the 50% growth story; the stock fell 22%. Per @wallstengine, Q2 revenue was $1.92B against a $1.94B estimate, up 53%, adjusted EBITDA of $1.61B also missed, and free cash flow of $863.3M fell well short of the $1.29B estimate. x.comÂ
AppLovin is $200 cheaper and insiders still don't want to buy it. x.comÂ
AppLovin's ad yield engine has run out of gas, setting up the same structural decay that hit The Trade Desk as ad spend consolidates into walled gardens. Conversion rates stalling around 1.4%, delayed AI rollouts and mounting litigation point to a fundamental tailspin that Piper Sandler's cautious call understates. Being down 60% this year is not a bottom; buying here is catching a falling knife on a broken narrative. x.comÂ
AppLovin looks like an attractive ad-tech opportunity around $280 because its advertising platform has opened to all businesses, offering access to over 1 billion daily users, and management expects Q3 revenue above $2B. Shares are down nearly 62% from $733 despite Q2 revenue growth of 53% year over year. x.comÂ
AppLovin needs a very clean quarter to rebuild confidence. Investors question how much market-share runway its gaming ad business has left and how sustainable its very high margins are, and last quarter's model-upgrade cadence issues raised new execution concerns. Gaming ads must remain the central growth engine, since e-commerce will not be big enough for a while. x.com x.comÂ
AppLovin could drop toward $200 if the current move does not turn into a quick liquidity sweep and rally, because sector sentiment matters more than fundamentals in the short term, even though AppLovin is fundamentally a beast. x.comÂ
AppLovin is hated despite exceptional growth and profitability. In Q2 revenue grew 53% year over year with an 88.3% gross margin and a 77.7% operating margin. It also produced $869 million of free cash flow, a 100% FCF margin, and put $551 million of it into buybacks. x.comÂ
AppLovin is no longer on the path of accelerating free cash flow that underpinned the bullish case, so it is time to move on. The weak quarter itself was a timing issue, but the outlook no longer fits a framework of owning businesses whose free cash flow is accelerating, and the stock has reached its predefined risk limit. x.com x.comÂ
AppLovin faces a long repair after its trend broke, even though its fundamentals rank in the top 30 of 2,000 stocks. Shares fell almost 60% from above $745 to near $315 after an August report, with revenue up 53% and an 84% EBITDA margin, narrowly missed its guidance midpoint, cracking the endless-beat assumption behind its multiple. Price sits below a falling 200-day average, and holders waiting for break-even must clear first. If the trend turns, 16.8x earnings for 37% growth would be rare. … Show more
AppLovin looks tempting after a massive reset, with some of the strongest fundamentals on the market, in an elite club with Palantir and CrowdStrike. Its price is down 57% from the highs, back to 2024 levels, and its P/E has fallen from 70x to a record-low 24x. Growth has decelerated from priced-for-perfection levels, but it is still a money machine, software-disruption fears are cooling and the stock is consolidating in a long-term support zone. The bottom is likely close. x.com x.com x.comÂ
Entravision is nearing a valuation worth loving as emotional traders sell an already hated stock and AppLovin adds to the fear. At this lower price, its valuation is becoming undeniably more interesting. x.comÂ
