Appen Logo

Appen shares down a colossal 21% falling gradually all day, to record one of the largest single-day falls since its debut on the ASX. Shares are now stuck in a trading halt pending the ‘speeding ticket’ (trading halt) from the ASX.

Image of Appen Share Price Falling
Source: Nabtrade.com.au, Appen Share Price ASX Vs PE Multiple (APX ASX)

So What Happened to Appen Shares?

Appen (APX.ASX) Share Price Down a Colossal 21%. Potentially the 21% drop had something to do with what was said at the 2021 Macquarie Investor Conference. Looking at the transcript from the teleconference Appen flagged the following fundamentals.

  • Revenue of $599.9M in 2020 was up 12% from the prior year
  • Underlying EBITDA of $108.6 up 8% on 2019.

Whilst the result seems ‘okay’ it’s worthwhile remembering that prior to the massive fall Appen was trading on a Massive PE multiple of approx 140. So Investors had massive expectations for the future growth of the company.

APX ASX Future Growth Not Achievable?

In Appen’s (APX ASX) response to the share price enquiry raised by the ASX today. Appen flag the following as a reason for the 21% drop in single day share price.

We also draw your attention to the recent share price decline in technology
stocks in the US which may be impacting sentiment around the technology sector in Australia.

Source: Appen’s release to the ASX share price enquiry

I’m sorry Appen management, but which other US shares are we seeing drop 21% in a single day? I don’t think this really cuts it for investor’s who have recently witnessed massive returns in a multitude of US technology stocks (AIRBNB, COIN) to name a few. We expect better from ASX listed technology stocks especially those with large valuations.

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Appen Share Price Upside from Here?

Appen flag in the Macquarie Investor Day reports a number of reasons behind why the result is lagging. One that has been flagged by Appen multiple times since it first started issuing profit downgrades.

COVID interrupted many businesses last year and that, in turn, reduced their digital ad spend for a period. This impacted our major customers’ sources of revenue, and
although digital ad spend has bounced back nicely, that experience is driving them to
invest in new AI products that are less reliant on advertising.

It is promising that the impact of COVID is starting to subside, but still very concerning being a SaaS business that COVID impacted it so much. Especially whilst other cloud-based SaaS services are delivering stellar returns for shareholders.

The Appen PE is currently looking at ~15x, based on EBITDA estimates this seems to represent decent value for the shares, provided this is indeed a blip on the radar and profitability and growth return.

Prophet’s Take:

Prophet is looking to slowly add shares in Appen during this time of share price weakness. We expect very turbulent trading.

We’ve decided to update this article with a link to our Due Diligence on the Appen Share Price. Link to Due Diligence Article.

Please Remember all Articles Published on Prophet Invest are Opinion only

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