Why the Appen share price plunged 11% on Thursday

Appen saw its share price bid significantly lower on Thursday after releasing its interim (H1) results to the market. We unpack those results below.

Appen share price collapses following H1 release

The Appen (APX) share price plunged on Thursday, 27 August, after the machine learning and artificial intelligence company released its first-half (H1) results to the market.

According to RBC analysts, Appen missed on both sales and EBITDA figures, which, according to the broker, was ‘driven by Speech & Image segment growth being lower than' RBC estimates.

In spite of that miss, RBC currently has an Outperform rating and a $43.50 price target on Appen, suggesting moderate potential upside from current price levels.

Interestingly, while the stock plunged sharply within the first few hours of trade – hitting an intraday low of $35.66 per share, the stock finished out the session at $38.65 per share, still down 11% for the session, but potentially suggesting that the market overreacted in the direct aftermath of the H1 release.

Interim results in focus

Looking at the highlights from Appen’s interim results, the company recorded impressive top line growth across the half ending 30 June, with revenue climbing 25% to $306.2 million. On a more granular level, the company's Relevance segment continues to be the major driver of growth, accounting for $273.9 million (+34%) of H1 revenues.

By comparison, Speech and Image segment revenue lagged during the first six months of Appen's FY20 – falling 20% to $31.9 million. Even so, management said positive long-term trends remain intact, ascribing this weakness to 'the inherent cyclicality of major programs.'

Commenting on these results, Appen’s Chairman Chris Vonwiller, noted:

'We are especially pleased with this result amidst the pandemic and the implementation of our growth initiatives. The Strength of our business model, market exposure, competitive position and our consistent executive give us the confidence to push forward with our investments to solidify future growth.'

Elsewhere, Appen revealed that in the last six months it had signed a platform agreement worth US$80 million – bringing the company's total annualised contract value (ACV) to US$103 million for the half ending 30 June.

In step with this robust top-line growth, Appen reported underlying earnings (EBITDA) of $49.1 million (+6%), while statutory EBITDA increased a more impressive 44%.

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.

Other bits and pieces: Dividends and FY20 outlook

Though APX is by a no means a dividend stock, the company nonetheless declared an interim dividend of 4.5 cents per share (50% franked) as part of today’s H1 results.

Looking forward, Appen kept its full-year guidance unchanged, expecting full-year underlying earnings (EBITDA) to come in at between $125 to $130 million, while maintaining earnings (EBITDA) margins in the high teens.

'The global slowdown in online advertising spend brought about by the pandemic will have a small impact on Appen's ad-related revenue in 2H,’ the company additionally flagged.

Underscoring such comments, advertising giants Facebook and Google both reported a deceleration in advertising revenue as part of their most recent results releases.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

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

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

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.