AppLovin vs. HPE: Which Tech Stock Can Bounce Back Faster?
It is absolutely no secret that the technology sector has been crushed recently. As of the Mar. 12 close, the Technology Select Sector SPDR Fund (NYSEARCA: XLK) is down nearly 13% from its Feb. 19 close.
Many stocks that had performed well and reached new highs in early 2025 have sold off extensively. This includes ad-tech company AppLovin (NASDAQ: APP) and legacy tech company Hewlett Packard Enterprise (NYSE: HPE). AppLovin is down 48% from its Feb. 13 high, while HPE has retreated 39% from its Jan. 22 high.
Given the massive drops seen in these two stocks, which one looks most attractive at this point? Below is a breakdown of what has led to the fall in these stocks and which one may be most likely to rebound strongly.
AppLovin: Short Sellers Put a Curse on the Stock Despite Strong Results
We’ll start with one of the most-loved stocks of 2024, AppLovin. The company’s share price ballooned over 700% on the year. Shares rose even more past that point after the company’s latest earnings report on Feb. 12, spiking 24%. The company impressed on revenue, earnings, and guidance.
It also shared positive comments about its early efforts in e-commerce advertising. Since then, shares have moved almost exclusively in one direction: down. A mixture of valuation worries and generalized stock market fear has contributed to this.
However, AppLovin’s fall was greatly accelerated by two bearish short reports on the company.
The reports claimed AppLovin is stealing data from Meta Platforms (NASDAQ: META) for its e-commerce push. They claimed the company’s ads automatically download apps onto users' phones without their consent, driving revenue to the firm. They also alleged accounting fraud.
These claims seem specious. Accounting firms audit the company’s financial statements, and they have not brought up any concerns. Also, it seems unlikely that AppLovin could use deceitful practices for long without facing consequences. The company generated $3.2 billion from its software segment in 2024, growing revenue by 75%. It is hard to imagine that its customers wouldn’t catch on to its fraudulent practices. They would stop directing business to the company, let alone massively increase their spending.
Additionally, Meta clearly has an incentive to crush competitors like AppLovin with lawsuits if these claims are true. Yet, it has taken no legal action. Also, these short sellers want the stock to drop. This makes them likely to exaggerate any nuggets of truth in their reports. However, it is possible more legitimate evidence supporting these claims could emerge.
Hewlett Packard: Weak Guidance and Consolidation Concerns Crater Stock
HPE's fall has largely been due to a disappointing earnings report on Mar. 6. Guidance was way below expectations for the fiscal full-year 2025.
The company is also facing unexpected challenges from the Department of Justice (DOJ) regarding its plan to buy Juniper Networks (NYSE: JNPR). The success of this acquisition is important to HPE’s strategic success going forward.
The complaint claims that the merger would result in HPE and Cisco Systems (NASDAQ: CSCO) controlling 70% of the Wireless Local Area Network market. This is a very high percentage, making antitrust enforcement a significant concern.
However, the DOJ released the complaint just 10 days into the Trump administration. Additionally, key quotes in the complaint came from an acting official and Biden administration holdover. This indicates the Trump administration had little influence on the announcement.
On Mar. 12, the Senate confirmed Trump’s actual pick for the same position in the DOJ antitrust division. The DOJ's view might now change considerably, providing a lifeboat to HPE.
APP vs. HPE: Evidence Paints Two Very Different Pictures
Both AppLovin and HPE have done well in shifting their business. AppLovin has gone from a mobile game developer to a company focused on advertising, leading to impressive growth. For HPE, its server business growth of 30% has accelerated overall growth to 16% compared to -14% growth at the end of 2023.
The negative developments surrounding AppLovin appear less backed by solid evidence. HPE’s fall came from actual earnings and negative merger news. AppLovin’s was due to short-seller claims with significant evidence pushing back against them.
A change in overall tech and market sentiment impacted both firms.
Recent Wall Street price targets tracked by MarketBeat reveal a big difference in the average implied upside for the two stocks.
The figure for AppLovin is around 98%, while for HPE, it is just 5%. Overall, the case for a rebound in AppLovin looks significantly stronger at this point.
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