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Key Points

• AppLovin stock is moving lower in conjunction with a sell-off for the broader market on the heels of Q1 GDP data.

• The stock is also selling off due to new analyst forecasts from Edgewater Research.

• Following 43% sales growth last year, Edgewater sees AppLovin's growth slipping to 18% this year.

The stock of AppLovin (NASDAQ: APP) is getting hit with big sell-offs in Wednesday's trading. The ad tech company's share price was down 5.9% as of 1:15 p.m. ET today. The S&P 500 and Nasdaq Composite were down 0.9% and 1.7%, respectively. AppLovin stock had been down as much as 14.8% earlier in the session.

AppLovin is losing ground today amid a sell-off for the broader market driven by the latest data on U.S. gross domestic product (GDP). The stock is also being hurt by bearish coverage that was published by an analyst this morning.

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Stocks pull back on GDP and consumer spending data

The U.S. Commerce Department released GDP data for the first quarter today that showed an unexpected contraction. GDP shrank 0.3% year over year in the quarter, falling short of economists' target for growth of 0.3%. The shortfall was driven by a steep rise in imports as purchasers moved to buy foreign goods before new tariffs were put in place at the beginning of this month.

Imports are subtracted from GDP, and the purchasing surge was larger than anticipated. While the first quarter's import-driven GDP decline doesn't necessarily suggest any structural weakness in the U.S. economy, investors are concerned because consumer spending increased just 1.8% compared to 4% in last year's quarter.

Edgewater Research thinks AppLovin's growth will decelerate a lot this year

Before the market opened this morning, Edgewater Research updated its sales targets for AppLovin and highlighted challenges it sees facing the business. While Edgewater stuck with its forecast for first-quarter revenue to increase approximately 55% year over year and reach $1.08 billion in the first quarter, it expects that growth will decelerate substantially as the year progresses.

Setting a sales target of $5.7 billion for 2025, Edgewater is now guiding for revenue to increase just 18% annually. It sees signs that growth for the mobile gaming market is losing steam, and it expects that increased competition from Meta Platforms and Alphabet could further curb AppLovin's growth potential.