The Appen share price just soared to an all-time high. Is it a buy?

The Appen share price is up more than 70% this year. Here's why I think it is a strong buy-and-hold option for the long term.

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This year, the Appen Ltd (ASX: APX) share price has been a strong performer, and today is no different with the Appen share price storming to a new all-time high in intraday trade.

Investors who bought Appen shares in January would now be sitting on gains of more than 74% – a solid return for shareholders who kept their cool in the ASX March sell-off.

Here's why I think this quality ASX tech share is a strong buy-and-hold option for the long term.

What does Appen do?

A global leader in collecting and labelling data for machine learning and artificial intelligence (AI) systems. Appen's vast expertise includes 1 million skilled contractors who speak over 180 languages. The company boasts the industry's most advanced annotation platform.

Digital assistants and chat boxes, recommenders on search engines and fraud protection systems are just some of the applications Appen works to develop and improve.

Appen's global reach

The company's corporate headquarters is in New South Wales, Australia, with offices in various locations around the world to service its diverse customer base. Appen's clients are from an array of industries such as technology, automotive, financial services, retail, healthcare and government.

Some of its customers include tech titans Apple, Google and Microsoft, with voice-activated assistants like Siri and Google no doubt a major source of recurring revenue for Appen.

The COVID-19 impact

The company has come through the coronavirus pandemic relatively unharmed as it largely generates its earnings from the US tech giants, which have all continued to spend on projects. In addition, the increase in search, social media and e-commerce platforms is expected to help Appen meet its 2020 performance targets.

The company restated its FY20 guidance of an underlying earnings before interest, tax, depreciation and amortisation (EBITA) in the range of $125–$130 million. This represents a 23.8–28.7% year-on-year increase.

Appen also recently advised the market it had a healthy balance sheet, with cash resources in excess of $100 million. This puts the company in a good spot to weather any unforeseen circumstances.

Can the Appen share price run continue?

As we approach the end of reporting season, it is evident that investors have been snapping up Appen shares ahead of its FY20 results to be released on 27 August.

In intraday trade today, Appen shares hit a new all-time high of $39.31. The Appen share price set its previous all-time high of $38.47 in June of this year. At the time of writing, Appen shares are trading at $39.20.

As the AI market is expected to grow to $97.9 billion by 2023, the addressable market opportunity is enormous for Appen. The company is investing in product diversification to support long-term growth.

Foolish takeaway

Expectations are high for Appen, however investing in quality ASX growth shares for the long-term can be very rewarding to shareholders. While Appen should be able to meet its forecasted earnings for 2020, I think that the Appen share price will move based on the near-term projections for the company come late August.

Appen has a history of being conservative when it comes to releasing guidance numbers. You only have to look back to the last few years when Appen updated the market with its upgraded earnings.

Nonetheless, I believe that the Appen share price is a strong buy for any investor who chooses to have a member of the WAAAX group in their portfolio.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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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