Down 60% in a year, are Appen shares a bargain buy?

Could 2023 be this tech stock's year?

| More on:
A young woman with glasses holds a pencil to her lips as she is surrounded by the reflection of data as though she is being photographed through a glass screen project with digital data.

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

Key points

  • The Appen share price has tumbled 60% over the last year to trade at $2.635 today
  • Its fall came amid a downturn in the company's earnings and a poor period for tech shares in general
  • Unfortunately, one top broker still sees a potential 15% downside for the stock

The Appen Ltd (ASX: APX) share price has taken a beating over the last 12 months, tumbling nearly 60% in that time.

Right now, stock in the tech outfit is trading for $2.635 apiece. This time last year, it was swapping hands for $6.55 per share.

For comparison, the All Ordinaries Index (ASX: XAO) has dumped 3% in that time while the S&P/ASX All Technology Index (ASX: XTX) has dropped 7%.

So, could now be the time to jump on board Appen shares and make the most of a potential recovery? Let's take a look.

What went wrong for the Appen share price?

The last 12 months have been a rollercoaster for those invested in the data and services provider's stock. Appen provides speech and language data to companies involved with artificial intelligence and machine learning.

The former market darling listed in 2015 after offering shares for 50 cents apiece in its initial public offering (IPO). It later rocketed to a record high of $42.53 in 2020.

However, its time in the sun was brief. The stock had hit a low of $2.22 by late 2022.

In the meantime, it was presented with a $9.50 per share, $1.2 billion takeover bid. Though, that was withdrawn within 24 hours of its announcement.

Between the offer being tabled and retracted, Appen revealed its earnings before interest, tax, depreciation, and amortisation (EBITDA) for the first half of financial year 2022 would likely be lower than the prior period.

And its earnings continued to fall in the second half. Its full year underlying EBITDA, revealed in February, came to just US$11 million – an 86% year-on-year tumble.

Simultaneously, soaring inflation and resulting rate hikes saw the market bidding down many ASX tech shares.

But with AI taking the public by storm in 2023 – take the rise of ChatGPT for example – could the future be brighter for the Appen share price?

Is now the time to snap up the ASX tech stock?

Datt Capital chief investment officer Emanuel Datt appears hopeful. The expert said, courtesy of reporting by my Fool colleague Tony:

Appen… has experienced significant downward pressure on the share price at the same time as AI has catapulted into mainstream consciousness via the launch of OpenAI's ChatGPT … We view this environment becoming more crowded and highly competitive.

Meanwhile, recent insider buying suggests those in the know are bullish on the stock.

Still, broker Bell Potter remains unconvinced. It tipped the Appen share price to fall 15% to $2.25.

It downgraded the stock following the release of the company's full year earnings, in which it dropped its financial year 2026 targets pending a full strategy review to be announced next month.

Appen also noted it's seen "a soft start" to the new year and expects its first half EBITDA to be "materially lower" than that of the prior period.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Appen. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

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 Megaport, Pilbara Minerals, Vysarn, and WiseTech shares are falling today

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

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »