Why AppLovin Stock Was Taking a Dive Today
Key Points
Google released Project Genie, an AI that allows VR game development, sending stocks like AppLovin, Unity, Take-Two, and Roblox tumbling.
AppLovin no longer has direct exposure to mobile games after selling that part of its business last year.
The company, which is now a pure-play adtech business, could benefit from a new gaming platform.
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Shares of AppLovin (NASDAQ: APP) were heading lower today in an apparent response to Google's Project Genie, a new prototype from Google DeepMind that allows users to create virtual worlds for gaming with AI.
The news sparked a sell-off among gaming stocks as Unity Software, Take-Two Interactive Software, and Roblox all fell sharply on the news.
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Applovin stock was down 11.7% as of 1:13 p.m. ET.
Image source: Getty Images.
Is Project Genie bad for AppLovin?
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.
What's next for AppLovin
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. Analysts are expecting revenue, which includes a headwind from the sales of the apps business, to grow 17.4% to $1.61 billion, and for adjusted earnings per share to jump from $1.73 to $2.95.
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Jeremy Bowman has positions in AppLovin. The Motley Fool has positions in and recommends Roblox, Take-Two Interactive Software, and Unity Software. The Motley Fool has a disclosure policy.
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