14-July-2023: Just revisiting this old straw from just over two years ago (May 2021). It's interesting to see how wrong those brokers were back then!
09-May-2021: I do not hold Appen (APX) shares, as I believe their business model is being undermined and they are becoming less and less relevant now. I also think they are much less of a "tech" company than most people realise. They rely on cheap labour to constantly provide a serious flow of data into their systems, which is not a very automated system at all. Once the data is in they can do plenty of stuff with it, but the data entry itself is very labour-intensive, and they pay peanuts to those people who are doing it. I don't claim to know the business very well, but I know enough to know that I'm not interested on doing further research on them, as they face more headwinds than tailwinds - in my opinion.
That said, to add to the conversation here, as Appen (APX) appears to be a very polarising and popular company to discuss here, I thought I'd include a snapshot of the latest broker views on Appen - see image below. Remember that this is only part of the data available - on FNArena.com - and it could be worth considering a subscription to their service if you want to stay up-to-date with this stuff, or read Rudi's summaries of those brokers' reports and client notes. As a subscriber, you can create a watchlist and every time there is any news or updates on any company on your watchlist, you'll receive an email about it - usually immediately - or at the very least on the same day.
It pays to note however that FNArena only cover 7 brokers:
...so there are limitations there - you have to remember that the consensus views are only a consensus of those 7 brokers, and usually not all 7 of them will cover the company you are interested in, so it's usually a consensus of less than 7. For instance, only 5 of those 7 currently cover Appen. Anyhow, for what it's worth, here is a snapshot - as of today - Sunday 09-May-2021 - of what Macquarie, Citi, Ord Minnett, UBS and Credit Suisse currently think of Appen:
If that is too small to read, click on it and it should get bigger.
04-July-2023: The lowest target price (TP) for Appen there was from Macquarie, who reckoned Appen were worth $16.00/share, and the highest was Citi who thought $30.90 was a fair price. Appen closed at $2.38 today, and they are still in a long-term downtrend that started back in August 2020 when they were just below $40/share.
Today they're around -94% off those highs, or are being valued by the market now as being worth around 6% of what they were selling for back then (in August 2020).
Brokers are often behind the curve, or behind the play and trying to catch up, and they are rarely right it seems.
Appen was trading at $22.23/share and all five major broking firms had either a "Neutral" or "Buy" call on APX at that point. Appen are down 89% from there, and here's what the brokers' views are today:
I note that three of those five brokers from two years ago have ceased coverage of Appen (Ord Minnett, UBS and Credit Suisse), however Bell Potter and Morgan Stanley have joined Citi and Macquarie in covering Appen, and only Bell Potter is neutral (with a "Hold" call made back on May 18th). The other three are negative, with 1x "Sell", 1 x "Underperform", and one "Underweight". The four price targets range from $1.35/share up to $2.40/share. Still too high. They're going lower than that!
Additional: Looks like FNArena cover 8 broking firms now, being the seven I've listed above (with links), plus Bell Potter as well.
03-July-2023: Things can look different depending on your point of view. For instance, this looks sort-of bullish:
And then Appen released this: 10-May-2023: Trading-update,-cost-reduction-program-and-strategy-refresh.PDF
Which confirmed they were running at a loss - i.e. no longer profitable, but they had a plan. A plan to return themselves to profitability. But it would cost money and take time.
So, on that day (10-May-2023), the APX share price (SP) drops -90c (-28.2%).
Then we get these announcements:
16-May-2023: Appen-announces-fully-underwritten-A$60m-equity-raising.PDF
26-May-2023: 2023-Annual-General-Meeting---Chair's-Address.PDF
From the 26th May to the 2nd June, the APX SP rose from $2.42/share to $3.76/share, a rise of +55.37% in one week, so now their chart looks like this:
VERY bullish - who wouldn't jump on that ride? Well, anyone who had followed the company for a few years would probably be a bit wary, but for those trend-followers who don't care about fundamentals or management, it might well look enticing.
And then this happens:
09-June-2023: Completion-of-Retail-Entitlement-Offer.PDF
And the underwriters, who were left with 45% of the retail entitlement offer started selling, and the usual shorter suspects began to lodge "Substantial Holder" notices, and Appens' CFO, appointed on May 1st (see here: Helen-Johnson-appointed-Chief-Financial-Officer.PDF) announces she is quitting that role ("for personal reasons") on June 26th:
Departure-of-CFO-and-appointment-of-Deputy-CFO.PDF
So their latest CFO lasted just 8 weeks.
And the 6 month graph, up until today, looks like this:
That's the thing about Appen. Every rally is followed by a fall back down. Have a look at their 3 year chart:
Not pretty. Sometimes you need to zoom out and look at the bigger picture. This is a business in serious decline. Apart from short term trading, which just might be profitable if you time it right, Appen is a company I would completely avoid, no matter what they announce.
Here is the 3 year chart of WiseTech (WTC):
Now that's the sort of company you want to be invested in. Like Appen, WiseTech also have a volatile share price. The WTC SP has plenty of drawdowns. But the overall trend is up. So far, WTC have weathered every storm, including a public attack by a US shorting firm, and they just keep heading north east at a decent clip, over time.
Appen, not so much.
What have Wisetech and Appen got in common? Well, remember WAAAX? It was our almost pitiful version of the US' FAANG stocks. FAANG is now MAMAA, which is an acronym for the top five tech stocks listed in the US. Together, they have a total market capitalisation of around US$10 Trillion (or they did in January 2022) and carry an approximate 21% weight in the S&P 500 index (again, that was in Jan, 2022). MAMAA are Meta Platforms (Meta, formerly Facebook), Alphabet (formerly Google), Microsoft, Amazon, and Apple. This acronym was coined as a replacement for FAANG after Facebook changed its name to Meta Platforms, and Google had become Alphabet, and Netflix was thought to be ex-growth after their share price fell by over 70% from around $690 in mid-November 2021 down to around $190/share in late June 2022. Unlike Appen, Netflix did bounce, and it doesn't seem like a dead cat bounce...
So WAAAX was once Wisetech, Appen, Altium, Afterpay and Xero. Then Afterpay got swallowed up by Square and Square became Block, and it isn't an Aussie company now. So, we have WAAX with two As instead of three As. But there's a bloody good argument that it should be just the one A, which would be Altium, because Appen isn't really even a tech stock, they are more of a labour hire company for data input (such as tagging images to assist machine learning), and they're definitely not a growth stock. Here's the past 3 years, with the share prices of Appen, Wisetech, Altium and Xero from the same common starting point.
Big difference between the best and worst there. Of course they don't compare to the FAANGs/MAMAAs of the USA, as they are HEAPS smaller, and together they represent a very small percentage of our All Ords Index (our equivalent to the S&P500 over in the US). The USA's Tech (or "IT" sector) is their largest sector, and it's one of our smallest. Our largest sectors are Materials (Miners) and Financials (Banks).
I maintain that Appen has no place as a WAAX company, or any place in the portfolio of any serious investor who is prepared to do even a small amount of research before buying shares. They are going lower, or they are going broke, probably both, in that order.
They often have a nice bounce (such as that +55% rise in one week recently, as explained above), but because they're coming off SUCH a LOW BASE now, these percentages are almost meaningless, as the 3 year graph clearly shows.
It's all about proper perspective.
Unless you're in them for a short-term trade (and history would suggest the shorter the better), there wouldn't be a barge pole long enough.
