The Appen Ltd (ASX: APX) share price is taking a tumble, down 9.9% in Monday morning trade.
The artificial intelligence (AI) data services company saw its shares rocket last week, gaining 28% over the past four trading days. With no price-sensitive news out last week, that surge looks to have been driven by investor exuberance surrounding OpenAIâs ChatGPT.
But after Appen reported that it expects a significant non-cash impairment charge, investors are hitting the sell button today.
Why the impairment charge?
The Appen share price is under pressure after the company reviewed the value of cash generating units (CGU) and its assets. Following that review, the ASX tech stock said it expects to recognise a non-cash, pre-tax impairment charge of $204 million in its financial results for the year ended 31 December.
The company said the charge âreflects the impairment of goodwill and certain intangibles associated with the new markets (excluding China) CGUâ. These are comprised of the Global Product, Enterprise, Government and Quadrant business units.
Also likely pressuring the Appen share price today is the companyâs reduction in future revenue growth assumptions.
As the impairment is non-cash and a non-operating item, underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) and underlying net profits after tax (NPAT) wonât be impacted. And Appen highlighted that it found no indicators of impairment in its larger Global Services CGU.
Appen is scheduled to release its full-year results on 27 February.
The ASX tech stock said it expects to report revenue at the higher end of its guidance range of US$375 million to US$395 million. EBITDA is expected to come in at the lower end of the guidance range of US$13 million to US$18 million.
Appen share price snapshot
As you can see in the chart below, the Appen share price was enjoying a strong rebound in 2023. Even with todayâs big slide factored in, the ASX tech share remains up 20% year to date.
The post Why is the Appen share price diving 10% on Monday? appeared first on The Motley Fool Australia.
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More reading
- Why Appen, Endeavour, Imugene, and Treasury Wine shares are pushing higher
- Appen share price soars again, up 29% since Monday
- Beaten-up ASX 300 tech share Appen is booming 10% today
- Why Appen, Janus Henderson, Lithium Energy, and Pinnacle shares are charging higher
- Why Appen, Gold Road, Healius, and Pinnacle shares are dropping today
Motley Fool contributor Bernd Struben 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. 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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