The Appen Ltd (ASX: APX) share price was sold off on Thursday following the release of the artificial intelligence data services company's full year results.
The company's shares ended the day a massive 29% lower at $6.11.
This means the Appen share price is now down a very disappointing 70% from its 52-week high.
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Is the Appen share price weakness a buying opportunity?
The team at Bell Potter has been running the rule over Appen's results and has given its verdict on its shares.
Unfortunately for any investors thinking that the Appen share price could now be an absolute bargain buy, its analysts aren't convinced and are suggesting that investors keep their powder dry for the time being.
According to the note, Bell Potter has retained its hold rating and slashed its price target by 41% to $6.75.
What did the broker say?
Bell Potter notes that Appen's full year results fell short of expectations.
It said: "Underlying EBITDA of US$77.7m was 4% below our forecast and the low end of the US$81-88m guidance range (which Appen had previously guided to). The miss was driven by both lower revenue than forecast (US$447.3m vs BP US$455.1m) and EBITDA margin (17.4% vs BP 17.8%). Operating cash flow was down 17% to US$53.9m and the cash conversion rate decreased from 103% to 77%. The final dividend of A5.5c 50% franked, however, was in line with our forecast."
The broker also points out that Appen is not providing guidance for FY 2022 but has provided longer term targets. And while the latter has led to Bell Potter increasing its revenue forecasts slightly, it has taken a hammer to its earnings estimates due to weaker margins.
Bell Potter explained: "We have upgraded our revenue forecasts by 2% and 5% in 2022 and 2023. Our forecast revenue growth is now in the low double digit percentages which is below the mid teens growth required to double revenue by 2026. We have, however, downgraded our underlying EBITDA forecasts by 13% and 14% in 2022 and 2023 due to reductions in our margin forecasts to around 16% in both periods."
