Why the Appen share price is soaring today

Appen Ltd (ASX: APX) shares are 14 per cent higher to $26.70 today after the machine learning business upgraded its calendar year 2019 guidance for EBITDA to land between $96 million to $99 million.

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Appen Ltd (ASX: APX) shares are 14 per cent higher to $26.70 today after the machine learning business upgraded its calendar year 2019 guidance for EBITDA to land between $96 million to $99 million. Previously the company guided for underlying EBITDA to trend towards $90 million. 

The shares have moved a little higher than the 10% upgrade to guidance, with Appen also noting that the updated guidance is before the potential tailwind of a weaker Australian dollar over the last couple of months of calendar 2019.

Appen mainly earns its sales in U.S. dollars and the new guidance is based on an exchange rate of A$1 buying US$0.74c, whereas the spot rate today is around around US$0.68c. This suggests actual EBITDA could land around $100 million. 

On an operational basis it also attributed the improved guidance to more revenue and better margins from existing clients.

Importantly, it also confirmed its material Figure 8 acquisition that could 'make or break' the valuation going forward is performing well. 

Appen is not a classic software-as-a-service tech growth stock, but does have a second-to-none track record of growth and a steady management team.

It also benefits from exponentially growing demand for artificial intelligence or machine learning services across enterprise tech. 

As such it could keep delivering for investors.

Others to watch include Technology One Ltd (ASX: TNE) and EML Payments Limited (ASX: EML). 

Tom Richardson owns shares of Appen Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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