Down 65% this year, where to next for the Appen share price?

The Appen Ltd (ASX: APX) share price has continued a horrid run on the ASX this year, flopping 66% to levels not seen since mid-2017.

Let’s journey back to see what’s gone wrong for the Appen share price before taking a look at where it could be heading next.

What’s been driving the Appen share price lower?

Formerly an ASX tech darling, the Appen share price hit an all-time high of $43.50 on 26 August 2020. 

The following day, Appen released its first-half 2020 results. Results that failed to meet investors’ expectations, sparking the start of the sell-off for Appen shares.

But the sell-down really gathered steam when Appen downgraded guidance in December 2020 and detailed a number of operational headwinds.

Since then, Appen has restructured its business, acquired location data company Quadrant, missed guidance in FY21, and received a takeover bid in May this year at $9.50 per share.

The bid came and went in a flash, with Canadian firm Telus withdrawing its offer soon after it was made public.

Appen’s first-half 2022 results last month only added more salt to shareholders’ wounds, with the business still battling operational challenges.

In the six months to 30 June 2022, revenue backtracked 7% to US$183 million while underlying EBITDA cratered 69% to US$8.5 million.

Explaining the disappointing performance, Appen’s CEO Mark Brayan said:

The first half of the financial year has been characterised by challenging external operating and macro conditions, which has resulted in weaker digital advertising demand, and a slowdown in spending by some of our major customers.

Is Appen a buying opportunity?

Appen shares have already suffered a mighty fall from grace. But a leading broker thinks there could be more pain in store.

On the back of Appen’s first-half result, Macquarie retained its underperform rating on Appen shares. The broker trimmed its 12-month price target to $3.30. This implies a potential downside of 12% compared to the current Appen share price of $3.76.

Macquarie noted that Appen is making strong strides in China and is diversifying its customer base. However, customer concentration risk remains high, with major customers contributing 81% of total revenue in HY22.

The broker believes the Appen share price could surprise to the upside if the company achieves faster than expected growth in China. Plus, a potential increase in demand for annotation services outside of big tech could drive an acceleration in the growth of overall demand.

In Macquarie’s eyes, downside risks include a larger trend in big tech to move away from external vendors like Appen and instead complete annotation in-house. The broker also pointed to potential pricing pressure from a new increased competition landscape.

Appen share price snapshot

At $3.76, the Appen share price has wilted 91% from the all-time high it achieved in 2020.

Over the last 12 months, Appen shares are printing a 62% fall. 

In comparison, the S&P/ASX 200 Index (ASX: XJO) has retreated 6% across the same period. Meanwhile, the S&P/ASX All Technology Index (ASX: XTX) has shed 30%.

Formerly a multibillion-dollar company, Appen currently commands a market capitalisation of just $464 million.

The post Down 65% this year, where to next for the Appen share price? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Megaport share price soars 10% as ASX tech shares trump on Thursday
• Down 68% so far in 2022, can Appen shares ‘get through this?’
• Why did the Appen share price just hit a 5-year low?
• Which crypto is ASX 300 tech company Appen holding and why?
• Appen share price rockets then stalls on US$9m half-year loss

Motley Fool contributor Cathryn Goh 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.

from The Motley Fool Australia https://ift.tt/86ULzxp