Why is the Appen share price sinking 15% today?

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the Electro Optic Systems share price declines today on news the CEO has resigned

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the Electro Optic Systems share price declines today on news the CEO has resigned

The Appen Ltd (ASX: APX) share price is having a terrible start to the week.

In afternoon trade, the artificial intelligence data services company’s shares are down a sizeable 15% to $5.60.

Why is the Appen share price crashing on Monday?

The Appen share price has come under pressure for a few reasons on Monday.

One is broad weakness in the tech sector following a poor finish to the week on the tech-focused Nasdaq index.

This has seen the S&P ASX All Technology index tumble 2.2% this afternoon.

What else?

The reason for the weakness on Wall Street’s Nasdaq index is having a negative impact on the Appen share price.

Investors were hitting the sell button on social media and advertising stocks on Friday night after Snapchat’s owner, Snap Inc, released a very disappointing update. Snap saw its shares crash almost 40%, Meta (Facebook) was down almost 8%, and Google dropped almost 6%.

As Appen generates the majority of its revenue from these companies, their underperformance could ultimately have an impact on demand.

Anything else?

Finally, a note out of Citi could be weighing on sentiment and the Appen share price today.

While its analysts have retained their neutral rating and $6.60 price target, they have warned that the market is too optimistic on Appen ahead of its first half earnings.

Citi highlights that the consensus estimate is for EBITDA of US$20.6 million. However, it believes that Appen will fall short of that and is forecasting EBITDA of US$19 million instead.

The broker also warned that there is a risk to Appen’s guidance for a material increase in second half revenue. This is due to weakness in digital advertising and Facebook’s transition to a new artificial intelligence engine.

The post Why is the Appen share price sinking 15% today? appeared first on The Motley Fool Australia.

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More reading

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. has positions in and has recommended Appen Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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