What happened

Shares of mobile app developer and monetization company AppLovin (APP -2.99%) fell hard on Thursday following the release of financial results for the second quarter of 2022. As of 1:30 p.m. ET, its stock was down 11%.

So what

AppLovin shareholders are getting used to the roller-coaster ride. This is the fourth consecutive session of a move of 10% or more, with up and down days alternating. In Q2, revenue was up 16% year over year to $776 million, but net income dropped to a loss of $22 million compared with a profit of $14 million last year.

This drop in profitability concerned Wall Street. BTIG analyst Clark Lampen lowered his price target for AppLovin from $60 per share to $53 per share, according to The Fly. Similarly, Truist analyst Youssef Squali lowered his price target from $77 per share to $65 per share.

Both analysts have maintained their buy ratings for the company, and their price targets are significantly higher than where shares trade right now. However, stocks tend to sell off when price targets are lowered, regardless of the other factors I just mentioned. And it contributed to AppLovin's drop today.

Now what

The company has both a first-party apps business and a platform for third-party app monetization. It's interested in selling its first-party apps business but still has it for now. And struggles in this segment caused management to lower full-year revenue guidance from $3.14 billion-$3.44 billion to $2.84 billion-$3.14 billion. To reiterate, the lowered guidance is 100% due to its apps business, not its software platform.

On Aug. 8, AppLovin made a surprising unsolicited proposal to merge with competitor Unity Software. AppLovin stock has experienced choppy trading ever since.

Unity appears to have declined AppLovin's offer by reiterating its intentions of merging with ironSource. But even though that door appears to have closed, the entire situation plants a seed of doubt about the future of AppLovin as a stand-alone company. And for this reason, it could remain a volatile investment until there's greater clarity regarding the long-term vision of its management.