Looking past the headlines
- APP up roughly 75% after 57% correction
- Monday pullback a case of “index disappointment”?
- Analysts highlight potential of proposed games sale
To say that AppLovin (APP) has been on quite a ride over the past 10 months or so is probably a bit of an understatement.
After rallying more than 640% from August 2024 to early February 2025, shares of the mobile advertising and games company slid 57% over the next couple of months before, as of last Friday, rallying 90%:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
The stock started out this week making some headlines, falling more than 8% on Monday amid reports that it would not be added to the S&P 500, as some investors had previously expected.
However, that wasn’t the focus of new research from Morgan Stanley & Co. analysts who, in raising their profit target to $460 (roughly 15% above yesterday’s levels), argued the company’s plan to sell its mobile games business was a bullish development that would make the company more valuable by increasing focus on its profitable ad business.1
APP appeared on at least two LiveAction scans for unusual options activity yesterday (highest positive net premium and largest number of trades), but some traders may have been more interested in the fact that its implied volatility (IV) was well below average over the next several expirations:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Because relatively high IV tends to inflate options premiums and relatively low IV tends to deflate them, options buyers often concentrate on low-IV options while sellers focus on high-IV options, all else being equal.
Market Mover Update: Eli Lilly (LLY) edged higher to start the week, extending its rebound off a key technical level to more than 8% since May 23 (see “Pharma stock tests support”).
Today’s numbers include (all times ET): NFIB Small Business Optimism Index (6 a.m.).
Today’s earnings include: Designer Brands (DBI), Dave & Buster's (PLAY), Children's Place (PLCE), J.M. Smucker (SJM), Gitlab (GTLB), United Natural Foods (UNFI).
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1 MorganStanley.com. It’s More Valuable Without the Apps. 6/9/25.