The Nasdaq Composite remains in correction territory — more than 10% below a recent high. So I’ve been searching for US growth stocks to consider for my portfolio in April.
While I found a handful of candidates, these two didn’t make the cut.
AppLovin
The first is AppLovin (NASDAQ: APP), whose shares soared over 700% last year. However, they’ve crashed 46% since Valentine’s Day. That was a heart-wrenching plunge for shareholders, although the stock is still nearly 300% higher than this time last year!
AppLovin develops adtech software for mobile app developers, helping them monetise their applications. Last year, revenue jumped 43% to $4.71bn, while net profit skyrocketed 343% to $1.58bn.
This profit surge was driven by its AI engine, AXON, which significantly boosted ad targeting performance. It’s also expanded beyond mobile games into e-commerce ads.
Why the price fall?
However, three separate reports from short sellers in a month have hammered the price. The most recent one from Muddy Waters claimed AppLovin may have been secretly pulling user ID data from platforms like Google, Facebook, Snapchat, and TikTok, potentially violating terms of service. This echoed previous reports that accused the firm of fraudulent activities.
Fuzzy Panda (one of the other short sellers) wrote to the S&P 500 inclusion committee in a bid to keep the company out of the index. It said: “AppLovin’s recent revenue growth has been based in data theft, revenue fraud, and the exploitation of our country’s laws protecting children.”
Now, AppLovin strongly denies these allegations. CEO Adam Foroughi wrote: “The reports are littered with inaccuracies and false assertions.” And inclusion in the S&P 500 might boost AppLovin’s valuation — not what short sellers want, as they stand to benefit when the stock falls.
If it transpires that the company has done nothing wrong, the share price could rebound strongly. Analysts still expect net profit to rise 39% this year. However, given the uncertainty surrounding the business model here, I’m avoiding AppLovin shares.
IonQ
The second stock is IonQ (NYSE: IONQ). This one has also been on a wild ride, soaring 1,200% between early 2023 and the end of 2024, only to plunge 45% this year.
IonQ is focused on developing general-purpose quantum computers and supporting infrastructure. Its technology is accessible through cloud platforms like Amazon Web Services, Microsoft Azure, and Google Cloud, allowing users to experiment and apply quantum computing in their respective fields.
Quantum computers use the rules of quantum physics to process information in a totally different way from regular computers. If fully realised, they could revolutionise everything from medicine and materials science to cryptography.
IonQ’s revenue surged 95% last year to $43.1m, exceeding its own guidance. Wall Street expects that to nearly double this year, so this is a high-growth stock, for sure. However, profits aren’t expected for years and the price-to-sales multiple is a sky-high 113.
Meanwhile, it faces daunting competition from deep-pocketed tech giants like IBM, Google, and Microsoft. Even AI chip king Nvidia is now entering the quantum computing research space.
IonQ is a fascinating stock, but it’s very speculative. For me, it’s far too early to start picking winners in the quantum space.
