The Appen Ltd (ASX:APX) share price is down 55% since the start of the year. Does this make it a bargain buy or should you wait?
The post Is the Appen (ASX:APX) share price a bargain or should you wait? appeared first on The Motley Fool Australia. –
The Appen Ltd (ASX: APX) share price is pushing higher today at long last.
In afternoon trade, the artificial intelligence data services company’s shares are up 1% to $11.33.
Though, with the Appen share price still down 55% since the start of the year, it is far too soon to start celebrating.
Why is the Appen share price down 55% in 2021?
One word arguably sums up the reason for the decline in the Appen share price this year – uncertainty.
And uncertainty, as we have seen also with A2 Milk Company Ltd (ASX: A2M), does not mix well with high earnings multiples.
For a company to be able to command a sky high earnings multiple, there has to be some level of confidence that it will deliver on the market’s growth expectations.
For Appen, through no fault of its own, this simply isn’t the case right now because of the impact COVID-19 has had on the industry.
Lack of visibility
A recent note out of Bell Potter sums up exactly what the market is thinking and why the Appen share price is languishing in 2021.
It commented: “Appen delivered a speech at a broker conference that in our view was full of mixed messages and provided little clarity on how the company is tracking this year. The speech seemed to be aimed at providing an update on current market conditions and responding to some of the negative commentary in various recent broker reports on increased competition and self-supervised machine learning. Notably, there was no mention of the 2021 guidance.”
“Our overall impression of the speech was some of the challenges from last year are still ongoing but this relates more to customer behaviour and spending patterns rather than a shift in market dynamics and the competitive environment. We now wait for the AGM at the end of the month for a likely update on the 2021 guidance,” it concluded.
Bell Potter currently has a hold rating and $13.25 price target on its shares. It also estimates that its shares are trading at 24x FY 2021 earnings and 20x FY 2022 earnings at present.
And while the broker’s price target implies decent upside for the Appen share price over the next 12 months, it is worth remembering that this target could change depending on how the annual general meeting update goes.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
- ASX shares that will benefit from the upcoming index changes
- Why a2 Milk, American Pacific Borate, Appen, & Incitec Pivot are tumbling lower
- ASX 200 Weekly Wrap: Bank shares push ASX 200 towards all-time high
- These were the worst performing ASX 200 shares last week
- ASX tech shares are in a world of pain. There might be more to come…
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.