Date of Data Capture: 11/02/2020
Name: APPEN LIMITED (APX)
Classification: Software & IT Services
Current Price: $26.77
Market Capitalisation: $3.24 B
Forecast EBITDA Growth: 37.73%
Yield Estimate: 0.37%
Consensus Price Target: $28.79
# Covering Analysts: 8
Discount at Current Price: 7.55%
Price Target Trend (3-Month): Up-Flat -0.99%
Signal Timeframe: Monthly-Weekly-Daily
Trend Bias: Up-Flat / Long-Medium
Focus: Capital Growth
Set up Notes:
• Fast growing tech stock APX is emerging from a recent medium-term consolidation and looks likely to continue higher on strong performance, and forecasts for continued growth out to 2021.
• Strong sales and earnings data last year helped drive strong gains and while growth is expected to slow a little – it is set to remain robust going forward, driven by expanding sales and margins.
• Pricing reflects the rapidly expanding revenue numbers and it has been a year since the last minor pullback - we expect recent weakness to also be a favourable entry opportunity, with excellent positive momentum signalling here.
Support ($): 20.00, 22.00, 24.00 & 26.00.
Resistance ($): 28.00, 30.00, 32.00 & clear.
Growth Focus: APPEN LIMITED (APX)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
If knowledge truly is powerful, then we are right to take a view on Appen Ltd (APX) as the artificial intelligence specialist moves higher into a potential new longer-term uptrend on strong performance and backed by very attractive forecasting.
Listed since the early stages of 2015, Appen provides data solutions services for technology clients across the globe with over 600 staff spread from the Asia Pacific to the UK and US. Some of the applications of their technology include digital assistants and chatbots, search engine recommenders, and systems for fraud protection. While there exists huge commercial scope for growth within the field of machine learning, there also exists a very significant governmental and state interest in developing AI technology and the efficiencies it offers.
To put this into perspective, the market of AI services was valued at $643M in 2016 and is projected to reach as much as $36B by 2025. That gives APX enormous potential for organic growth, already well-supported by the strong reporting figures of recent years, with sales earnings and margins increasing rapidly. Of particular note is the size and strength of earnings gains seen in the US market, which should remain a core focus for future growth.
Appen has been making a habit of upgrading its earnings guidance, and last reporting showed revenue up 60%, earnings up 81%, margins up 16% and profits up 67% - with forecasting showing solid expectations for similarly strident gains seen through to 2021. Despite the rapid rise of the share price, the stock remains under consensus price targets, which have been steadily increasing over the last 4 years. This favourable view is reinforced by a strong majority positive aggregate analyst sentiment, with no negative views at current levels.
Pricing history shows APX climbing dramatically higher since listing in early 2015, though this incredibly strong performance has been played out through a series of medium-term uptrends. In that time, there have been only intermittent consolidations, when the share price overtook the company’s considerable underlying momentum, ultimately providing fresh entries to those with the patience to wait for them.
Here we believe we have another opportunity with pricing falling from $32 to $20 during the second half of 2019, eventually moving up from its support base to break linear resistance just last month. With momentum building and signalling turning positive again, we are looking to follow the smart money into this world leader in artificial intelligence.