By Sam Boughedda
AppLovin Corp (NASDAQ:APP) was downgraded to Neutral by BofA on Friday, with the firm also slashing its price target on the stock to $17 per share from $35.
BofA analysts told investors in a research note that mobile app ecosystem weakness has prompted a more cautious tone.
AppLovin shares are up over 4% Friday at the time of writing. However, they are down over 82% in 2022.
The company reported its third-quarter earnings results after the close on Wednesday, missing profit and revenue expectations, while fourth-quarter and full-year guidance also missed analyst expectations.
"Software revenue was below expectations ($307Mn versus $316Mn BofA estimate), as was App revenue ($407Mn versus $420Mn BofA estimate). Combined EBITDA was slightly below our expectation ($258Mn versus $266Mn BofA estimate). Mgmt. attributed the slight Q/Q decline in Software revenue to "ongoing challenges facing the mobile app industry" and macro headwinds and indicated that advertisers are in the process of adjusting their ROAS goals despite gameplay consumption remaining stable," wrote the analysts.
"Mgmt commented that all lines of business within Software were broadly in line with Q2, which implies to us that ALX DSP ($20Mn last quarter) did not grow as we expected, and core AppDiscovery was down ~$11Mn Q/Q. Apps segment EBITDA margin (16.5%) exceeded our expectation (15%) on significant cuts in UA and small asset sales," they continued.
The analysts concluded that they are downgrading the stock as they do not see near-term catalysts despite its low valuation.