Macquarie forecasts Appen shares to crash a further 47%

A business woman looks unhappy while she flies a red flag at her laptop.

A business woman looks unhappy while she flies a red flag at her laptop.

I think it is safe to say that it has been a week to forget for Appen Ltd (ASX: APX) shares.

Since this time last week, the artificial intelligence data services company’s shares have fallen over 28%.

This means that Appen shares are now down 65% over the last 12 months.

And just when you thought it was safe to go back into the water, one leading broker is warning investors that there could still be even more declines to come.

Appen shares tipped to sink and sink some more

According to a note out of Macquarie, its analysts have downgraded Appen’s shares and taken an axe to their valuation.

The note reveals that Macquarie has downgraded the struggling tech share to an underperform rating and cut its price target by more than half to a lowly $1.18.

Based on the current Appen share price of $2.21, this implies potential downside of almost 47% for investors over the next 12 months.

It also suggests that the whole of Appen is only worth in the region of $150 million. A far cry from its multi-billion dollar market capitalisation a few years ago.

Macquarie has concerns that its poor performance will continue for some time to come, putting pressure on its cash flow and balance sheet.

Thankfully, with the company having no debt, it sees a capital raising as a moderate risk. However, it certainly is possible given how things are going.

Elsewhere, analysts at Morgan Stanley are also feeling bearish. The broker has retained its underweight rating and cut its price target to $2.00.

Morgan Stanley appears concerned how Appen will be able to drive revenue growth while also cutting its costs markedly. All in all, the broker appears to believe investors should stay away until the company has proven its business model.

The post Macquarie forecasts Appen shares to crash a further 47% 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. 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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