The Appen Ltd (ASX: APX) share price is having a relatively positive finish to the week.
In early afternoon trade, the struggling ASX 300 tech share is up 0.6% to $2.62.
This means the Appen share price is now up a sizeable 16% since the start of the month.
What's driving this beaten down ASX 300 tech share higher?
Investors appear to have been buying this ASX 300 tech share this month thanks to the release of an announcement at the end of February.
Appen revealed the launch of three new products that it is hoping will help it benefit from the rise of ChatGPT. It is the artificial intelligence (AI) powered natural language processing tool taking the world by storm.
The first product is called Reinforcement Learning with Human Feedback. It tackles the risks of bias and hallucinations in large language models. A hallucination is a confident response by an AI that shouldn't be justified by its training data.
The second is Document Intelligence, which enables clients to extract key insights from their unstructured documents.
And the third and final new product is Automated LP Labelling. It leverages generative Al capabilities and zero/few shots learning techniques to speed up data annotation.
Should you invest?
As promising as these products may be, the team at Bell Potter believes investors should sit this one out for the time being.
This week, the broker has downgraded the ASX 300 tech share to a sell rating with a price target of $2.25. This implies potential downside of 14% for the Appen share price over the next 12 months.
Bell Potter's main concern is the lack of visibility on Appen's future earnings. It commented:
The SELL is based on valuation but the other key issue we have is the lack of visibility due to the relatively low level of recurring revenue and uncertainty over customer spend. The risk to our downgrade is the company comes out with positive news or developments when the results of a strategic review are released in May.
But in our view there is no quick fix to the lack of visibility and/or relatively low level of recurring revenue due to the purchase order nature of the business so any change will take time and this is what we have already allowed for in our forecasts.
