AppLovin Corp (NASDAQ:APP) shares fell 14% then bounced back to trade 4% higher pre-market on Tuesday following reports that the firm’s data collection practices are being probed by the Securities and Exchange Commission (SEC).
Per the reports, the investigation originates from a whistleblower complaint and short-seller reports alleging that AppLovin mishandled user data on platforms including Meta, Snap, and TikTok, using techniques such as “fingerprinting” to track users.
The SEC has not officially accused the AI marketing technology company of any wrongdoing.
Citi analysts see the absence of an 8K filing as a positive, believing this suggests AppLovin does not view this probe as a “material” risk.
“Following today's move, we estimate the market is pricing in an approximate $680 million revenue headwind, which to us seems a bit extreme given the regulator has not officially accused AppLovin of wrongdoing,” they wrote.
They maintained a ‘Buy’ rating and $850 price target on AppLovin, which traded at about $611 before the opening bell in New York.
“We would be buyers on any weakness,” Citi added.