BofA Stands Firm on AppLovin Buy Rating Despite Short-Seller Allegations

AppLovin Corp (NASDAQ: APP) is a prominent player in the tech industry, known for its software solutions that enhance marketing and monetization for online advertisers. Since its public debut in 2021, AppLovin has seen its stock rise by 532%, marking it as a top growth stock for investors. Despite recent challenges, the company remains a favored tech stock in the market.

On May 21, 2025, Valenzuela Victoria, the Chief Legal Officer and Corporate Secretary of AppLovin, sold 600 shares of Class A Common Stock at $366.50 each. This transaction comes amid a significant decline in AppLovin's share price, which dropped over 35% after reaching an all-time high of $525.15 in February. The decline was due to a pending class action lawsuit and reports from short sellers.

Despite these challenges, AppLovin reported better-than-expected first-quarter results, leading to a 10% increase in its stock price earlier this month. Currently, the share price is 13.2% higher than at the start of the year and has surged 336.1% compared to the same time last year. This performance significantly outpaces both the S&P 500 and the Nasdaq.

AppLovin's financial metrics reveal a price-to-earnings (P/E) ratio of approximately 63.43, indicating that investors are willing to pay over 63 times the company's earnings for its shares. The price-to-sales ratio stands at about 23.61, suggesting the market values the company at over 23 times its annual sales. The enterprise value to sales ratio is around 24.23, reflecting the company's total valuation in relation to its sales.

The company has a high debt-to-equity ratio of 6.45, indicating significant use of debt compared to equity. However, the current ratio of approximately 1.68 suggests a relatively healthy liquidity position, with current assets being 1.68 times current liabilities. Despite a challenging environment, AppLovin continues to focus on its core business, maintaining its position as a leading tech stock.

Jefferies reiterated its Buy rating and $460 price target on AppLovin (NASDAQ:APP) ahead of the company’s upcoming first-quarter earnings on May 7, expressing confidence in both near-term results and the broader ad market backdrop.

The firm highlighted strength in AppLovin’s gaming ad segment and growing traction with e-commerce advertisers as key drivers of potential revenue upside in Q1 and guidance strength in Q2. Initial concerns about tariff-related headwinds have eased, thanks to reassuring results from Meta, Google, and Reddit, which suggest advertising demand remains solid.

Jefferies noted that new advertiser additions—a key growth metric—appear to be exceeding the expected pace of 100 per month, which could provide further momentum. The firm also pointed to growing evidence that AppLovin is becoming a top-three advertising channel for many e-commerce brands, with some allocating more than 10% of their ad budgets to the platform.

If the company reports over 60% year-over-year ad revenue growth in Q1 and offers at least mid-single-digit sequential revenue growth guidance for Q2, Jefferies expects the stock to respond positively—especially given its 40% decline since early February.

Jefferies reiterated its Buy rating and $460 price target on AppLovin (NASDAQ:APP) ahead of the company’s upcoming first-quarter earnings on May 7, expressing confidence in both near-term results and the broader ad market backdrop.

The firm highlighted strength in AppLovin’s gaming ad segment and growing traction with e-commerce advertisers as key drivers of potential revenue upside in Q1 and guidance strength in Q2. Initial concerns about tariff-related headwinds have eased, thanks to reassuring results from Meta, Google, and Reddit, which suggest advertising demand remains solid.

Jefferies noted that new advertiser additions—a key growth metric—appear to be exceeding the expected pace of 100 per month, which could provide further momentum. The firm also pointed to growing evidence that AppLovin is becoming a top-three advertising channel for many e-commerce brands, with some allocating more than 10% of their ad budgets to the platform.

If the company reports over 60% year-over-year ad revenue growth in Q1 and offers at least mid-single-digit sequential revenue growth guidance for Q2, Jefferies expects the stock to respond positively—especially given its 40% decline since early February.

BofA Securities kept its Buy rating and $580 price target on AppLovin (NASDAQ:APP), reaffirming confidence in the mobile ad tech company following a short-seller report that questioned its business practices and long-term viability.

Analysts responded to a recent critical report from Muddy Waters, which alleged that AppLovin faces elevated risks of being removed from major platforms like iOS, Android, or Meta, and that its flagship product Audience+ lacks differentiation and meaningful value to advertisers.

In a blog post published by AppLovin’s CEO on March 27, the company defended Audience+, asserting that its data collection practices align with industry norms and that the product complements rather than replaces existing ad channels.

After conducting its own review and consulting with an independent expert, BofA concluded that the concerns raised reflect typical competitive dynamics within the online advertising ecosystem, not structural red flags.

BofA continues to view AppLovin as a top pick in the sector, citing its rapid EBITDA growth trajectory—forecasted at a 50% compound annual rate over the next two years—and a valuation multiple of just 17x EV/2026 EBITDA, which the firm sees as undervalued.

Despite headline volatility, the bank believes AppLovin remains well-positioned for sustained expansion, supported by its tech stack, scale advantages, and ongoing innovation in ad targeting.

AppLovin (NASDAQ:APP) has been positively highlighted by Benchmark and added to its Top Ideas List, signaling strong growth potential for the company. Analysts point to key catalysts that could sustain and accelerate revenue expansion in the near to medium term.

The company’s AI-driven ad targeting within the gaming sector continues to be a significant revenue driver. Additionally, the emergence of e-commerce advertising, particularly with the anticipated introduction of self-service tools, is expected to unlock new monetization opportunities.

AppLovin's stock is further supported by an ongoing share buyback program, which could enhance earnings per share over time. As the platform sees an influx of non-gaming advertisers, major gaming publishers who were previously hesitant to host competitor ads may reconsider, leading to increased ad inventory and further revenue growth.

With multiple growth levers in play, AppLovin appears well-positioned to capitalize on expanding ad demand across both gaming and non-gaming verticals.

AppLovin (NASDAQ:APP) has been positively highlighted by Benchmark and added to its Top Ideas List, signaling strong growth potential for the company. Analysts point to key catalysts that could sustain and accelerate revenue expansion in the near to medium term.

The company’s AI-driven ad targeting within the gaming sector continues to be a significant revenue driver. Additionally, the emergence of e-commerce advertising, particularly with the anticipated introduction of self-service tools, is expected to unlock new monetization opportunities.

AppLovin's stock is further supported by an ongoing share buyback program, which could enhance earnings per share over time. As the platform sees an influx of non-gaming advertisers, major gaming publishers who were previously hesitant to host competitor ads may reconsider, leading to increased ad inventory and further revenue growth.

With multiple growth levers in play, AppLovin appears well-positioned to capitalize on expanding ad demand across both gaming and non-gaming verticals.