AppLovin Corp. experienced a significant stock price drop of over 20% following a short report released by Muddy Waters Research, marking the third such report against the company in about a month. The report by Muddy Waters alleged issues such as misappropriation of user data and questioned the sustainability of AppLovin's business model, claiming that about 52% of its e-commerce sales come from retargeting and estimating a 23% churn rate in Q1 2025. In response to the series of short reports, AppLovin has retained the law firm Quinn Emanuel Urquhart & Sullivan, with partner Alex Spiro leading an independent investigation into the allegations. CEO Adam Foroughi emphasized the company's commitment to defending against market manipulation through false narratives, highlighting the company's innovation and long-term value amid the short-seller noise. Despite the stock plunge, several analysts have come out in support of AppLovin. Wells Fargo reiterated an Overweight rating with a price target of $538, citing that their checks indicate a higher level of e-commerce incrementality, with 55-60% of AppLovin's e-commerce customers being new to the brand. Loop Capital maintained a Buy rating with a $650 price target, dismissing the short report's claims as unfounded and pointing to the strength of AppLovin's AI model and momentum in mobile ads. AppLovin's shares saw a partial recovery, gaining 9% the following morning on the back of this analyst support.