Hot Picks

What's going on

The immediate July 2026 trigger was a Bank of America note flagging that new e-commerce sign-ups had cooled in June, but this compounds a much bigger, unresolved story: since January 2026 short-seller CapitalWatch has alleged AppLovin's management views Anti-Money Laundering laws as non-existent, accepting funds from global epicenters of telecom fraud, and the report also stoked fears of a looming "regulatory storm" involving the Department of Justice and the Committee on Foreign Investment in the United States. On top of that, a securities class action has been filed and Goldman Sachs slashed its price target for AppLovin from a lofty $500.00 to a more sobering $335.00 back in April.

The case for it

The bull case is that AppLovin has weathered short-seller attacks before and rebounded, and the current sell-off could again be an overreaction to noise around a legitimately excellent, fast-growing, high-margin ad-tech business trading at a reasonable forward P/E. If the money-laundering/CFIUS allegations turn out to be baseless (as prior 2025 reports did), and e-commerce growth merely normalizes rather than collapses, the stock could snap back sharply given its 78% operating margins and 59% revenue growth.</thesis> <parameter name="risks">Unlike the 2025 short-seller episodes that fizzled, this round involves potential DOJ and CFIUS scrutiny — actual government agencies, not just a research firm's opinion — plus a live securities class action and heavy insider selling with zero insider buying, which is a classic red flag when a company's own management doesn't buy the dip. The balance sheet also carries 163% debt/equity with negative-looking equity (267% ROE implies a thin equity base), meaning any adverse regulatory or financing shock has little cushion.</risks> <parameter name="sources"> <parameter name="sources">["https://www.investing.com/news/stock-market-news/applovin-shares-slide-as-shortseller-alleges-global-money-laundering-ties-4455516","https://www.cnbc.com/2026/01/27/applovin-short-seller-capitalwatch-report.html","https://natlawreview.com/press-releases/applovin-app-under-pressure-analyst-downgrades-follow-short-seller-barrage","https://www.tikr.com/blog/applovin-stock-fell-43-from-its-high-is-the-selloff-overdone","https://www.farmerswin.com/news/story/54842/applovin-has-far-more-worries-than-a-short-seller-s-report","https://www.fool.com/investing/2026/07/22/why-applovin-stock-fell-24-in-the-first-half-of-20/"]

What could go wrong

What's going on

The 2021 collapse was caused by the failed "Zillow Offers" home-flipping business, which the company shut down after huge losses — that's old news and already priced in. But the stock has kept falling in 2026 for new reasons: the FTC filed a complaint against Zillow and Redfin in September 2025 alleging the two agreed to remove competition from the rental listings market, and Zillow's CFO said in February 2026 that increased legal expenses would create a roughly 200 basis point drag on margins, causing a 16-17% one-day stock drop. On top of that, multiple law firms have since filed active securities-fraud class actions covering purchases between February 11, 2025 and May 7, 2026 for allegedly failing to disclose material information, with a lead-plaintiff deadline of August 10, 2026 — meaning this litigation is unresolved right now, not history.

The case for it

The bull case would be: revenue is growing 18%, the balance sheet is clean (low debt, plenty of cash), and the forward P/E of ~10 looks cheap for a growing internet platform. If the legal overhang clears and margins recover, there could be upside. But right now that's a big "if" resting on litigation outcomes nobody can predict.

What could go wrong

The profitability numbers here are backward-looking and already weak (2.3% net margin, tiny return on equity of 1.3%, trailing P/E of 127 driven by barely-there earnings) — an unfavorable antitrust ruling or settlement could pile new costs on top of that thin margin. Separately, Google rolled out its own home listing service on search results across the U.S. after months of pilot testing, a direct threat to Zillow's core traffic-driven business model from the one company with the reach to hurt it. There's also an active dispute where two-thirds of Zillow's Chicago home listings abruptly vanished amid an ongoing dispute with a local multiple listing service, showing operational/legal friction with data partners. Given unresolved FTC litigation, active fraud lawsuits, and a new large competitor, the "cheap" valuation may simply reflect a business under genuine multi-front attack — this is the textbook pattern where the market is pricing in real, forward-looking deterioration.

What's going on

Zillow's original 2021 crash was the well-known iBuying (Zillow Offers) disaster, but that's ancient history — the stock has been sliding again in 2025-2026 for a new reason: the FTC sued Zillow and Redfin in September 2025 alleging they illegally colluded (Zillow paid Redfin $100M) to suppress competition in online rental listings, and a wave of securities-fraud class actions followed, each disclosure knocking the stock down further (a 16-17% single-day drop, then more hits in May and July 2026).

The case for it

The bull case rests entirely on the reported numbers: real revenue growth (18%), a healthy balance sheet, strong free cash flow, and a forward P/E near 10 — all of which look statistically like a bargain. But those numbers were generated by a business arrangement (the Redfin rental-listings deal) that a federal court has now let proceed to trial as a potential antitrust violation, meaning a meaningful slice of current profits could be unwound or fined if Zillow loses.

What could go wrong

This isn't a one-off legal charge — it's an unresolved antitrust trial plus stacked securities-fraud class actions questioning whether management misled investors about the nature of the Redfin deal; if Zillow loses, the FTC could force it to unwind the arrangement that helped its rental ad revenue, and shareholder litigation could mean dilutive settlements, both of which would invalidate the "cheap on trailing numbers" thesis. The stock's continued slide through multiple 2026 disclosures (not a single clean event) suggests the market sees this as an ongoing, not resolved, risk.