Shares of artificial intelligence (AI)-powered ad tech company AppLovin (APP) tumbled on Monday after Bloomberg reported that the SEC is investigating the company’s data-collection practices. The agency is looking into whether AppLovin broke rules on targeted advertising, the report said. The stock plunged 14% at market close and fell another 2.3% in after-hours trading.
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The investigation comes after several short-seller reports earlier this year questioned the company’s ad-tracking methods. Bloomberg noted that neither AppLovin nor its executives have been accused of any wrongdoing. A company spokesperson said AppLovin “regularly engages with regulators” and would disclose any material updates through public channels.
Hot Stock Faces Sudden Setback
The selloff hit just as AppLovin had been one of Wall Street’s top performers. The stock is still up nearly 81% this year after soaring more than 700% in 2024, driven by strong demand for its AI-powered ad tools. The company’s software helps brands place more effective ads using real-time data.
AppLovin joined the S&P 500 last month, replacing MarketAxess Holdings. The inclusion came despite warnings from short sellers who urged the index committee to block the move.
Short Sellers Keep the Pressure On
Three short-selling firms, Muddy Waters, Fuzzy Panda, and Culper Research, have accused AppLovin of using ad-tracking methods that violate app store policies. Muddy Waters said the company “improperly extracts” user data from platforms like Meta, Snap, and TikTok to deliver targeted ads without full consent.
CEO Adam Foroughi fired back earlier this year, defending AppLovin’s practices and calling the reports an effort to profit from fear. Still, the new SEC probe has rattled investors and raised fresh questions about the company’s ad model and regulatory risks.
Is APP a Good Stock to Buy?
Overall, Wall Street has a Strong Buy consensus rating on AppLovin stock based on 14 Buys and two Holds. The average APP stock price target of $675 indicates a possible upside of 14.99% from current levels.
