Why the Appen (ASX:APX) share price is down 6% to a multi-year low

The Appen Ltd (ASX:APX) share price is sinking on Thursday following the release of a presentation. Here's what you need to know…

| More on:
appen share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Appen Ltd (ASX: APX) share price is sinking lower on Thursday morning.

In morning trade, the artificial intelligence (AI) data services company's shares are down 6% to a multi-year low of $13.82.

Why is the Appen share price sinking?

Investors have been selling the company's shares this morning following the release of a presentation ahead of its appearance at the Macquarie Group Ltd (ASX: MQG) conference.

While that presentation didn't include any new financial data, the company's CEO, Mark Brayan, provided a lot of colour of industry conditions.

Mr Brayan started by explaining why market conditions have been choppy during COVID-19, which has impacted demand, its growth, and ultimately the Appen share price.

He said: "Clearly, ours is a dynamic market. Our customers, large and small, are responding to market forces, including those above [data privacy and anti-trust concerns], and developing AI products at speed, to better their competitors."

"Coupled with this is the fact that AI product development is experimental. The performance of the underlying model is unknown until it's built and tested in the real world. This results in an iterative process in which models are built, tested, tuned, re-tested and so on. Training data is an essential component of machine learning and is tied to our customers' product development lifecycles. As such, training data volume requirements are not always linear."

"This is the primary reason behind the recent choppiness in our growth. Our major customers are reprioritising their product development projects as they iterate and build new products in response to dynamic market forces. This has resulted in changing data volumes on a handful of large projects and this impacted our revenue," Mr Brayan explained.

Current trading conditions

Positively, he advised that there's been no change in the need for training data. More companies are investing in AI and they all need training data.

Mr Brayan notes that the high growth in the number of customers it is winning, including in China, is a testament to this.

The CEO also revealed that the competitive environment for relevance data is unchanged, with Appen and Lionbridge AI remaining the key providers. Relevance represents ~90% of its revenue, so this is a big positive.

Pleasingly, the company is not seeing any unusual pressure on pricing. Mr Brayan advised that its "customers want a good deal and they negotiate well, but they will pay for quality and reliability and our reputation is strong in these areas."

What else did Appen say?

While the above was positive, there were a few items that appear to be the reason why the Appen share price is falling today.

Mr Brayan explained: "Our customers are developing new AI products in response to COVID's impact on online advertising last year and regulatory pressures such as anti-trust and data privacy. This dictates the data they need for product development and impacts their engineering resource allocations and the volumes and types of data they need from us."

"As stated before, machine learning is an iterative process, and our customers are switching resources between development projects as they pursue new break-out products. This in turn has impacted a handful of our larger programs."

"Our competitors outside of relevance are maturing. This is unsurprising. Their presence and funding demonstrate that ours is an attractive market. We maintain our leadership position and our customers rely on us for quality, scale, security and reliability but it means that we have to maintain our flow of new product features and fight harder to stay ahead," he added.

The company is aiming to offset this by looking beyond data collection and labelling for additional growth paths in the broader AI market. Management expects that these will be technical in nature and build on its products, customer base, and market position.

The Appen share price is now down 46% year to date.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Kogan, Monash IVF, OFX, and ResMed shares are falling today

Why are these shares taking a tumble today? Let's find out.

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Appen, DroneShield, Gentrack, and New Hope shares are dropping today

These shares are starting the week in the red. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Dexus, Dusk, Fletcher Building, and Paladin Energy shares are falling today

These shares are ending the week in the red. But why?

Read more »

Couple look at a bottle of wine while trying to decide what to buy.
Consumer Staples & Discretionary Shares

Treasury Wine shares: Buy, hold, or sell? Here's Macquarie's take

What is Macquarie forecasting for Treasury Wine shares amid the CEO’s unexpected exit?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Newmont, NRW, Peet, and Treasury Wine shares are dropping today

Let's find out why investors are selling down these shares on Thursday.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Aristocrat, EBR, GQG, and Insignia shares are tumbling today

These shares are having a tough time on hump day. Let's find out why.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Healius, Light & Wonder, REA Group, and Regis Resources shares are falling today

These shares are ending the week in the red. Let's find out why.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why ANZ, Brainchip, Light & Wonder, and Pilbara Minerals shares are falling today

These shares are tumbling on Thursday. But why?

Read more »