AppLovin: Another Short-Seller Report

Morningstar’s Metrics for AppLovin

• Fair Value Estimate: $284.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

On March 27, Muddy Waters Research released a short-seller report on AppLovin APP, alleging that management overstates the firm’s return on advertising spending, aggressively retargets to “steal attribution,” and most importantly, violates Google, Meta, and others’ terms of service by creating persistent identity graphs, or PIGs, to train its advertising optimization model. A PIG is a collection of user identifiers taken from multiple platforms (obtained against the TOS) and combined to create a digital profile for that user. After the report’s release, shares quickly fell 20% from $325 per share to $260.

We maintain our fair value estimate of $284 per share and narrow moat for AppLovin but emphasize our Very High Uncertainty Rating, due to the firm’s dependence on its ad optimization model and success with e-commerce advertisers. Certain claims in the report—notably, aggressive retargeting practices—seem misplaced. Retargeting is common and not inherently problematic. However, the allegation of explicitly violating platform TOS through unauthorized collection and aggregating proprietary IDs into PIGs without explicit consent is concerning.

AppLovin’s CEO responded, emphasizing that the firm’s tracking pixel usage mirrors Meta and Google’s practices. That said, the critical question remains whether AppLovin is using standard tracking pixels without personal identification information to train its model—an accepted practice—or aggregating proprietary platform identifiers without explicit consent.