Tech Sector Faces Turbulence: AppLovin vs. Hewlett Packard Enterprise
The technology sector has recently faced significant challenges. As of March 12, the Technology Select Sector SPDR Fund (NYSEARCA: XLK) has declined nearly 13% since its close on February 19. Investment in tech stocks, including ad-tech firm AppLovin (NASDAQ: APP) and legacy technology company Hewlett Packard Enterprise (NYSE: HPE), has seen substantial sell-offs since early 2025. AppLovin’s stock has dropped by 48% from its February 13 peak, while HPE’s shares have decreased by 39% from its January 22 high.
With these dramatic declines, investors are left wondering which stock presents a better buying opportunity. Below, we explore the factors contributing to the downturn in both stocks and assess which one may be poised for recovery.
AppLovin: Strong Results Overshadowed by Short Seller Reports
AppLovin had been one of the standout stocks of 2024, with shares soaring over 700% for the year. After reporting strong earnings on February 12, including impressive revenue, earnings, and forward guidance, the stock initially shot up 24%. However, since then, it has faced a steep decline, primarily due to concerns over valuation and a general sense of market unease.
The stock’s downfall was exacerbated by bearish short reports alleging that AppLovin was misusing data from Meta Platforms (NASDAQ: META) for its e-commerce initiatives. These reports claimed that AppLovin’s ads could automatically install apps on users’ devices without consent, raising fears of fraudulent practices.
These allegations lack solid grounding. External auditors routinely review AppLovin’s financial statements, and no substantial concerns have been flagged. Additionally, it’s unlikely that AppLovin could successfully employ deceptive practices without being detected by clients, who would presumably cease business if such claims were true. The company reported $3.2 billion from its software segment in 2024, reflecting a 75% revenue growth, which suggests its clients are satisfied with its operations.
Moreover, if Meta had valid claims against AppLovin, it would likely pursue legal action, which has not occurred. The potential for exaggeration in the short sellers’ narratives must also be considered, although legitimate evidence could arise.
Hewlett Packard: Weak Earnings and Merger Uncertainty
In contrast, Hewlett Packard Enterprise’s recent decline stems from a disappointing earnings report released on March 6. The guidance provided for the fiscal year 2025 fell significantly short of Wall Street’s expectations.
HPE also faces unexpected scrutiny from the Department of Justice regarding its planned acquisition of Juniper Networks (NYSE: JNPR). If successful, this merger is crucial to HPE’s future strategic direction. The DOJ’s complaint argues that the merger would create a market share too large—essentially 70% of the Wireless Local Area Network sector—raising antitrust concerns.
Significantly, the DOJ’s complaint emerged shortly after the Trump administration changed. Subsequently, a new appointee has been confirmed in the DOJ antitrust division, which could potentially alter the department’s stance and provide HPE with a path forward.
Comparing AppLovin and HPE: Divergent Paths Forward
Both companies have made strategic shifts in their business models. AppLovin has transitioned from a mobile gaming developer to a focus on advertising, leading to remarkable growth. Meanwhile, HPE has experienced a 30% uptick in its server business, contributing to an overall growth rate of 16%, a significant rebound from the -14% at the end of 2023.
The concerns surrounding AppLovin stem from speculative claims rather than substantiated financial missteps. Conversely, HPE’s stock drop is associated with documented earnings results and merger-related news. Moreover, the recent shift in market sentiment has impacted both companies.
MarketBeat’s analysis reveals a notable disparity in the growth potential for the two stocks. AppLovin has an average implied upside of roughly 98%, while HPE’s sits at just 5%. This data suggests that AppLovin presents a stronger case for recovery in the current climate.
As you consider your next investment moves, keep these insights in mind. Tracking Wall Street’s top analysts and their recommendations can provide valuable guidance.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
