AppLovin (APP) delivered a strong Q4 as gaming ads continued to outperform and ecommerce ad revenue grew sequentially, but the focus is on the planned general launch of the company's web self-serve tool in H1, Morgan Stanley said in a note Thursday.

Management highlighted recent model improvements that resulted in immediate return on ad spend gains, prompting advertisers to raise budgets, according to the note. It means the ad platform is competitive despite limited data penetration, the brokerage said.

Management also addressed bear concerns, citing the company's performance gains and closed-loop data advantage, Morgan Stanley said. While monitoring data points around bear cases is important, the brokerage said it's more focused on the rollout of the web self-serve tool for general availability.

"A breakthrough in ecommerce/web ads would likely be an important driver of multiple expansion and earnings revisions for 2026 and beyond," the brokerage said.

Morgan Stanley kept an overweight rating on AppLovin, while lowering the price target to $720 from $800.

Shares of the company fell more than 18% in recent Thursday trading.

Price: 370.81, Change: -86.00, Percent Change: -18.83