CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Why the Appen share price crashed 12.43% on Thursday

We look at why investors bid Appen lower during yesterday's session.

ASX-listed machine learning and artificial intelligence company Appen (ASX: APX) was punished by investors on Thursday, December 10, after management lowered their full-year earnings (EBITDA) guidance.

Yesterday’s downgrade builds on mounting bearish sentiment around the company: The stock has been in a downtrend since early November, losing close to 30% of its value in that period. Investors continued to bid the stock lower in response to the earnings downgrade, with APX closing out Thursday’s session at $26.20 per share, representing a sharp 12.43% pullback.

The downgrade in focus

Centrally, this earnings downgrade was primarily driven by a change in the behaviour of Appen’s core consumers, leading to a weaker than expected operational performance during the current quarter.

Appen, which has historically seen strong revenue growth during the fourth quarter, said that such growth had not materialised this year.

As a result of this, the company said it now expected FY20 earnings (EBITDA) to come in at the range of between $106-109 million, around 15% lower than the company’s previous EBITDA guidance of between $125-130 million.

Appen, in attempting to explain the behaviour of its core customers, said:

'Our major clients are reprioritising resources towards new product areas that enhance their long-term resilience and value which is currently impacting work volumes on some large mature projects.'

Despite this ‘short-term’ earnings impact, the company noted that the key long term trends supporting Appen’s growth remain strong, while also saying:

‘This new product development trend is positive for us and we are seeing a significant increase in the number of new projects amongst our major customers, albeit some are early in their lifecycle.’

Appen share price: The analyst take

Analysts from the Royal Bank of Canada described the downgrade as disappointing, though nonetheless retained their bullish $40.00 price target and Outperform rating on the machine learning and artificial intelligence company .

RBC analysts, like Appen itself, noted that this earnings downgrade is somewhat surprising given the strong performances from the likes of Facebook and Google in the prior quarter, noting that Appen’s:

‘Core customers are US technology players who represent +80% of APX's revenues and have seen a re-acceleration in their search and advertising revenues in recent quarterly results.’

This outcome then, mused the investment bank’s analysts: ‘Begs the question - Is it customer behaviour changing or also competitive pressures?’

Despite this setback, Appen did note that it expects ‘strong growth rates’ to resume in 2021. That reassurance, did little to calm the market’s nerves on Thursday, it would seem.

Want to take a position in Appen, long or short?

Create an IG trading account or log in to your existing account to get started now.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.