By Angela Palumbo

AppLovin stock has been on a wild ride, but Morgan Stanley says now is the time to buy shares in what it called a resilient advertising company.

Analyst Matthew Cost upgraded shares of AppLovin to Overweight from Equal-Weight on Thursday. He cut his target for the stock price to $350 from $470, but that still implies a gain of 27% from Wednesday's closing price of $274.96.

"APP has consistently gained share in gaming ads and has built scale in nongaming advertising far faster than we had previously expected," Cost wrote in a research note. "Despite these strong results, the stock has fallen by 46% since 4Q earnings and we now see an opportunity to buy ad tech's best executor 'on sale'."

Shares of AppLovin were down 5.4% Thursday to $260.22. The S&P 500 dropped 4.7%.

AppLovin stock has risen 241% over the past 12 months. The company increased revenue by 43% to $4.71 billion in 2024 from the previous year and 69% from 2021, the year it went public.

But the shares haven't been immune as the stock market has slid in response to President Donald Trump's tariff announcements. Shares are down 17% this year.

For AppLovin investors, one concern is that companies will reduce their ad spending in response to the economic uncertainty. The fear is that it could get worse if the U.S. enters a recession.

Still, Cost remains optimistic.

"We fully acknowledge the risks in the current macro environment and the potential for tactical downside from here," he wrote. "That said, we believe APP is among the most resilient names in our ad coverage, given its high exposure to direct response budgets and innovation-driven outperformance vs. its end market."

AppLovin stock has also been hit by a handful of short seller reports. Short sellers Fuzzy Panda Research and Culper Research published separate reports about AppLovin on Feb. 26 that alleged the company is replicating Meta Platform's ad targeting strategy. The short sellers also alleged that the ads AppLovin creates violate the terms of Google and Apple app stores.

Then on March 27, Muddy Waters Research said it took a short position on AppLovin. The firm said that AppLovin was "impermissibly extracting proprietary IDs" from Meta, Snap, TikTok, Reddit, Google, and others as a way "to target ads without user consent."

AppLovin CEO Adam Foroughi said in a blog post in February that the reports "are littered with inaccuracies and false assertions." In March, following the Muddy Waters report, he wrote, "to investors, I'd say: dig deeper. Given the AI tools available today, it's easy to discredit a short report like this in minutes."

Write to Angela Palumbo at angela.palumbo@dowjones.com

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April 10, 2025 12:59 ET (16:59 GMT)

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