AppLovin slips as Benchmark starts coverage with sell rating
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AppLovin (NASDAQ:APP) shares slipped nearly 2% in premarket trading as investment firm Benchmark started coverage on the mobile software company with a sell rating, citing worries over its near-term fundamentals and long-term positioning.
Analyst Mark Zgutowicz also put a $7 price target on AppLovin (APP) shares, noting that there is likely to be "meaningful" revisions to Wall Street estimates for 2023 in the coming months.
"Near-term, we expect AppLovinâs SPEC (software platform enterprise client) growth to stall meaningfully beginning [first-half of 2023] against difficult [last 12 months] inorganic compares," Zgutowicz wrote in a note to clients.
Zgutowicz added that in the intermediate to long-term, even though mobile gaming is a "significant mix" of consumer engagement, accounting for roughly a third of time on mobile devices according to App Annie, the expectation is that platforms such as AppLovin (APP) that do not have first-party data will see the monetization of this engagement "steadily decline." 
The analyst also noted that AppLovin (APP) is trying to divest its apps, or mobile games, division, but the risk to losing first-party data is "underappreciated," especially as iOS and Android restrict third-party data access and targeting. 
There is also the worry that Apple (AAPL) will "formally ban" iOS probabilistic/fingerprinting practices over the next six to nine months, which could hurt AppLovin's (APP) mediation platform. 
Additionally, there is the expectation that Google (GOOG) (GOOGL) introduces a similar program to Apple's (AAPL) Identifier for Advertisers on Android, either later this year or early in 2024. 
Zgutowicz also pointed to recent insider sales, with the CEO and CTO selling 100% and 66% of their Class A shares, respectively. The analyst noted, however, that AppLovin (APP) CEO Adam Foroughi still holds roughly 28M Class B shares.
Last month, AppLovin (APP) was picked as a potential "loser" in the immersive reality trend.