Insights

Is the Appen (ASX:APX) share price a cheap buy?

Are Appen shares a cheap opportunity after dropping heavily?
The post Is the Appen (ASX:APX) share price a cheap buy? appeared first on The Motley Fool Australia. –

The Appen Ltd (ASX: APX) share price has dropped a lot this year. Is it a cheap opportunity?

Appen has seen its shares fall 16% in a month, 33.4% in six months and 59% since the start of 2021. The Appen share price has sunk 71% from October 2020.

Appen’s latest result

Investors often use profit and/or the outlook to determine what price to value Appen at.

In the ASX tech share’s FY21 half-year result, it said that group revenue fell 2% to $196.6 million because of lower global services revenue because global customers allocated resources to new, non-advertising projects in the first half of 2021.

There were growth in some parts of the business. Global product revenue increased 15.2% to $22.3 million, as global customers invested in new AI use cases supported by Appen’s annotation platform and tools. New markets revenue was $47.8 million, an increase of 31.5%, driven by China, new enterprise customer wins customer wins and product-led growth. China FY21 half-year revenue was almost six times bigger than the first half of FY20.

The gross profit margin declined because of the customer and project mix, as large legacy project volume growth slowed and early stage projects commenced.

Appen said that its annual contract value (ACV) was $119.6 million, an increase of 16%.

But, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 14.3% to $27.7 million. Management attributed this to higher costs related to growth investments.

Underlying net profit after tax (NPAT) fell 35% to $12.5 million. Appen said that there was increased amortisation associated with investment in product development. Statutory net profit, which includes restructuring and acquisition costs, fell 55.1% to $6.7 million.

Outlook and Quadrent acquisition

As mentioned, the outlook can have an impact on the Appen share price.

After the acquisition of Quadrant, Appen reduced its EBITDA guidance range by $2 million to $81 million to $88 million. EBITDA is expected to be at the low end of that range because of ad-related project impacts.

Year to date revenue plus orders in hand for delivery in FY21 is approximately $360 million as at August 2021.

Quadrant was described by Appen as a global leader in mobile location and point of interest data. Management said the acquisition expanded the breadth of Appen’s data capabilities and product offering for existing customers and opens new growth opportunities in the global location intelligence market.

Is the Appen share price a buy?

The broker Macquarie Group Ltd (ASX: MQG) thinks not, with a neutral rating and a price target of $11.80. Macquarie feels that Appen’s management are too hopeful about expectations. It was one of the first brokers to have a negative outlook on Appen a while ago.

But Citi thinks Appen is a buy with a price target of $18.80. That represents a potential rise of almost 80% over the next 12 months. The broker likes its new projects as well as the acquisition of Quadrant.

On Citi’s numbers, Appen shares are valued at 21x FY22’s estimated earnings.

The post Is the Appen (ASX:APX) share price a cheap buy? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Appen right now?

Before you consider Appen, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Appen wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

3 ASX shares with strong growth potential

Here’s a look at how ASX WAAAX shares compare on growth

3 fantastic ASX shares that could be buys

Which ASX shares are leading the way on the ASX 300 today?

ASX 200 Weekly Wrap: A mixed bag of earnings dominates ASX

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Appen Ltd. The Motley Fool Australia owns shares of and has recommended Appen Ltd and Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!