After climbing by 9% in May, the Nasdaq-100 continued to ascend in June, gaining 6.3%.
But not all stocks in the index notched wins last month. Of the Nasdaq-100 stocks that sank lower, AppLovin (APP 2.90%), which provides a platform that allows mobile app developers to monetize and enhance their apps through targeted advertising, and athletic apparel designer Lululemon Athletica (LULU -1.70%) were at the bottom, plunging by 10.9% and 25%, respectively.
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Why investors lost their love for AppLovin and Lululemon
While AppLovin stock raced higher in May, a variety of factors led many investors to reconsider their positions last month. For one, investors had hoped that the index committee at S&P Dow Jones Indices would add AppLovin to the S&P 500 during its quarterly rebalancing of the index in June. Investors’ hopes were dashed, however — the stock was not chosen for inclusion.
Perhaps the greater catalyst for the stock’s decline, though, was a critical report that short-seller Culper Research issued. Identifying a variety of concerns, Culper Research began that report with the blistering assertion that AppLovin “blatantly misrepresented the scope of both its Chinese shareholders and its Chinese operations, posing not only risks to shareholders, but national security.”
Meanwhile, Lululemon began last month on an inauspicious note when it reported its first-quarter fiscal 2025 results on June 5. While the company notched a couple of successes, including revenue and earnings per share (EPS) growth, investors largely focused on management’s downwardly revised forecast for fiscal 2025. Management now projects diluted EPS of $14.58 to $14.78 for the year compared to the original forecast range of $14.95 to $15.15.
Throughout the remainder of June, numerous analysts slashed their price targets on Lululemon stock, giving investors more motivation to exit their positions.
Things haven’t improved much in July
Neither AppLovin nor Lululemon has recovered much from their June declines as of this writing, and it seems unlikely that they will in July. For the time being, prospective shareholders may be better advised to watch both stocks from a distance.
Bank of America is an advertising partner of Motley Fool Money. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AppLovin, Bank of America, and Lululemon Athletica Inc. The Motley Fool has a disclosure policy.