Lots of questions about what to do with AppLovin (APP) after the post earnings draw down. We needed some time to properly evaluate the position and after analysis it may now offer one of the more interesting prospective returns in the Inflection Portfolio. But that doesn’t automatically make it an immediate add.
Those are two different questions. Expected return can improve when a stock falls much faster than its earnings power. But we believe position size should increase only when the evidence and the risk/reward justify it. In APP’s case, the valuation has reset, the business is still growing at an impressive rate and several long-term growth levers remain intact. But the company also delivered its first meaningful execution miss of the AXON 2 era, and the stock has broken down technically while downgrades are rolling in heavy.
So our conclusion on this one is more nuanced than “buy the dip.” We’re holding the position, putting APP high on the list of potential additions but waiting for either technical stabilization or operating confirmation before committing materially more capital.
