The Appen Ltd (ASX: APX) share price is bouncing back from yesterday’s selloff.
In afternoon trade, the artificial intelligence data services company’s shares are up 14% to $6.95.
Why is the Appen share price racing higher?
As well as getting a boost from a rebound in the tech sector today, a broker note out of Jefferies appears to be giving the Appen share price a lift.
In response to the company’s disappointing full year results on Thursday, the team at Jefferies has retained its buy rating.
And while Jefferies has cut its price target by 20% to $12.00, this still implies significant upside of 73% over the next 12 months.
What did the broker say?
According to the note, Jefferies was surprised to see the Appen share price crash lower on Thursday.
It believes this was driven by the company’s lack of guidance but feels this is an overreaction. Particularly given how the market has treated Appen’s guidance with a pinch of salt recently following a series of downgrades.
Overall, Jefferies was pleased with Appen’s much-improved performance during the second half and appears positive on the future.
Not everyone is positive
But as mentioned here earlier, not everyone feels that the Appen share price offers value for money currently.
This morning the team at Bell Potter retained its hold rating and slashed its price target by 41% to $6.75.
Bell Potter made the move after downgrading its earnings estimates on the belief that Appen’s margins will weaken.
It explained: “We have upgraded our revenue forecasts by 2% and 5% in 2022 and 2023. Our forecast revenue growth is now in the low double digit percentages which is below the mid teens growth required to double revenue by 2026. We have, however, downgraded our underlying EBITDA forecasts by 13% and 14% in 2022 and 2023 due to reductions in our margin forecasts to around 16% in both periods.”
Time will tell which broker makes the right call.
The post Here’s why the Appen (ASX:APX) share price is racing 14% higher today appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Appen Ltd. The Motley Fool Australia owns and has recommended Appen Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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