Here’s why Appen (ASX:APX) crashed 30% today (and for the upteenth time in 3 years)

Nick Sundich Nick Sundich, August 28, 2023

Today Appen (ASX:APX) reported its 1HY23 results and once again investors received it poorly.

 

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Who is Appen (ASX:APX)?

Appen sources and sells machine learning data to train AI algorithms. Historically, its client base was concentrated around a handful of big tech companies and predominantly for advertising purposes. But Appen has been diversifying its customer base into new clients and markets although investors fear these cash flows won’t be as reliable and as strong as before. This has been showing in its results and in repeated failure to meet its own guidance, let alone consensus estimates.

In FY22, which is the calendar year, its revenue fell by 25% and its bottom line swung from a $28m profit to a $239m loss.

In 2023, the stock has surpassed $3 on a couple of occasions over hype that it can capitalise on the rise of ChatGPT and hope that things can get better because of new management and a cost reduction program. But so far it is not showing in the bottom line.

In 1HY23, the company’s revenue declined 24% to US$138.9m, a fall management blamed on challenging external operating and macroeconomic conditions. It posted an underlying loss of US$34.2m and a statutory loss of US$43.3m.

Shares fell more than 30% on Monday to go even further away from its mid-2020 highs.

 

Appen (ASX:APX) share price chart, log scale (Source: TradingView)

 

Was the result that bad?

Considering the hype about AI, and the company’s explicit promise to capitalise on it, it probably is. What made things worse is that after previously promising that the second half would be better, the company expects the second half to be roughly the same. It also promised it would reach ‘underlying cash EBITDA profitability on an annualised, run-rate basis‘.

But it would likely surprise nobody (us included) if it was a further deterioration still.

 

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