"The sell-off in AppLovin seems surprising because the company isn't a game developer anymore. It sold that part of its business last year as its adtech platform began to take off. Much of its business still relates to mobile games, but it's monetizing that through advertising, rather than game sales and fees. It's unclear if Project Genie will be disruptive to the mobile gaming industry, but it could potentially be a tailwind for AppLovin if it opens up new ad inventory in mobile gaming."
"AppLovin stock could also be facing pressure from a broader sell-off in software stocks, which has continued as the fast-growing adtech stock trades at a lofty price-to-sales ratio of 31 even after today's decline. The company will get a chance to redirect the narrative when it reports fourth-quarter earnings on Feb. 11."
Google's Project Genie prototype sparked a sell-off across gaming stocks, including Unity, Take-Two, and Roblox. AppLovin shares fell despite the company having sold its games business and operating now as a pure-play adtech firm. Much of AppLovin's revenue still ties to mobile gaming but is monetized through advertising rather than game sales. Project Genie could be disruptive to mobile gaming, yet it might create new ad inventory that benefits AppLovin. The stock also faces pressure from a broader software sell-off and a high price-to-sales ratio, with fourth-quarter earnings due Feb. 11 and analysts projecting revenue growth to $1.61 billion.
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