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

After a comprehensive withdrawal of a negative research report targeting the company, a major concern for AppLovin (APP.US) shareholders has been temporarily alleviated. Previously, independent research firm Capitalwatch, which issued the related allegations, stated that it had retracted all misconduct accusations against AppLovin and would cease further updates on the company.

Last month, Capitalwatch published a report claiming that AppLovin acted as a “money laundering machine” for a Southeast Asian transnational crime syndicate and questioned its business and financial structure. Subsequently, the firm first withdrew 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 this year, AppLovin sent a legal letter to Capitalwatch demanding that it cease related activities, describing the allegations in the report as “absurd and clearly false.” The company has not commented on the latest full retraction.

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

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 the fourth quarter increased 14% quarter-over-quarter, significantly surpassing the company’s previous 12% target, with the outperformance 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. Based on industry valuation adjustments, Morgan Stanley maintained an “Overweight” rating on the stock and lowered its target price from $800 to $720. In the report, Morgan Stanley analysts wrote, “Over the past three years, the speed of AppLovin’s innovation in 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 for the company 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 maintained a “Buy” rating and lowered its target price from $780 to $705.