The Appen Ltd (ASX: APX) share price is surging higher today as the S&P/ASX 200 Index (INDEXASX: XJO) is back in the green.
After rocketing as much as 9.7% higher to $21.05 in early afternoon trade, Appen shares are now sitting at $19.97 at the time of writing, up 4.1%.
So, let's take a look at what's behind Appen's share price today.
ASX tech sector has taken a big hit
The ASX tech sector has been hit particularly hard recently and Appen shares have not been immune to this market sell-off. As of market close yesterday, the Appen share price had fallen 29% in the past two weeks.
Across the board, our major Aussie tech shares including WiseTech Global Ltd (ASX: WTC), Altium Limited (ASX: ALU), Nearmap Ltd (ASX: NEA) and Afterpay Ltd (ASX: APT) have all taken big hits in recent weeks.
I think there are two key reasons for this. The first is the exposure of these companies to the global economy, with some having a direct link to China. Secondly, during periods of a major share market correction like we're now experiencing, growth shares that trade on eye-watering multiples are usually the first and hardest hit. So, sectors such as ASX technology which have seen the biggest recent share price gains are amongst those that suffer the biggest losses when the tide turns.
Strong recent performance
Reviewing Appen's full-year financial results for 2019, which were released a couple of weeks ago, puts the current market turmoil in perspective. These results revealed that Appen is progressing very well with its global growth strategy.
Appen delivered a 47% increase in total revenue to $536 million, while its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 42% to $101 million. Underlying net profit after tax (NPAT) came in 32% higher at $65 million. Meanwhile, Appen increased its full-year dividend by 25% over the prior year to 5 cents per share. I find these results to be quite strong in a challenging global market.
Along with these results, Appen provided full-year FY20 guidance for underlying EBITDA in the range of $125 million to $130 million. This represents year-on-year growth of 24% to 29% and if achieved, would be another strong result.
Foolish takeaway
I believe that the Appen share price is seeing strong growth today as bargain hunters enter the market to take advantage of a heavily sold off ASX tech sector.
In my opinion, Appen remains an excellent ASX tech share with an entrenched business model, so a strong rise today is not surprising.
I believe Appen is very well placed to see continued strong growth over the next five years, driven by the rapidly rising demand for artificial intelligence products and machine learning markets.
