Shares in Value Logo
Product Review Img Vertical

Date : 10/06/2023

Appen’s Phoenix-like Resurgence: Riding the AI Wave to Recovery

In a surprising turn of events, Appen Ltd (ASX: APX) shares have surged a staggering 35% in less than a week. This remarkable recovery has left investors wondering whether the worst is finally behind the beaten-down ASX tech share. While the broader market has witnessed modest gains, Appen’s recent performance is a beacon of hope for its shareholders. This article delves into the factors contributing to Appen’s share price rebound. It explores the company’s involvement in the thriving artificial intelligence (AI) sector.

APX: FY22 Results

APX shares are trading at $3.30 and gained 32% the previous week. The current market cap of the company is approximately 527.26 million AUD.

  1. Appen announced revenue of $388.31 million, declining 13% YoY.
  2. Its operating expense increased by 31% in FY22.
  3. APX recorded a loss of $239.07 million. Its loss increased by 938%.
  4. Its EBITDA was $8.26 million, declining 88% YoY.
  5. APX EPS was $0.27, declining 160% YoY.
  6. Its cash and cash equivalents were $23.43 million, declining 51% at the end of FY22.

APX: The AI Surge and Appen’s Role

One of the primary drivers behind Appen’s share price resurgence is its association with United States tech giant Nvidia Corporation (NASDAQ: NVDA). Nvidia’s astounding share price surge, fueled by its optimistic revenue forecast of US$11 billion for the second quarter, has created a ripple effect throughout the AI industry. Appen, known for providing and enhancing data used in AI and machine learning development, has been collaborating with Nvidia since 2020. Their joint efforts include combining data services with the NVIDIA AI Enterprise platform, enabling businesses to leverage real-time AI capabilities. The popularity of AI models like ChatGPT has caught the attention of investors, who recognize the sector’s vast potential for future growth.

APX: AI’s Growth Trajectory

The increasing interest in AI is not unwarranted. Market research studies predict that the AI market will experience a substantial compound annual growth rate (CAGR) of 39.4% and reach a value of US$422 billion by 2028. Appen’s Chair, Richard Freudenstein, highlighted the breakthroughs in generative AI and large language models like ChatGPT during the company’s annual general meeting (AGM). While Appen is excited about the potential of AI, its immediate focus lies in resetting the business to navigate the challenges ahead.

APX: Tech Sector Recovery

The broader tech sector has faced significant headwinds due to rising interest rates and inflation over the past year and a half. These macroeconomic factors have particularly impacted tech companies that are often highly leveraged. However, the tide is turning in 2023, with the S & P/ASX All Technology Index outperforming the S & P/ASX 200 Index. Furthermore, the NASDAQ Composite and BetaShares NASDAQ 100 ETF, which tracks the performance of major tech shares, have seen substantial gains. This resurgence indicates that the largest tech companies are bouncing back even amid rising rates and inflation concerns.

APX: Appen’s Recent Developments

Appen’s share price experienced a sharp decline following a negative trading update on May 10th. This update prompted a 28% drop in the share price within a single day. However, on May 16th, Appen announced a $60 million capital raising, aiming to address the challenges faced by the company. Although the news initially met with scepticism from ASX investors, the share price rebounded, reaching a seven-year low before recovering to close at $2.31. Appen’s retail entitlement offer allows existing shareholders to purchase one new share for every six shares owned for $1.85 per share. The funds raised will support the company’s cost reduction program, enhance its balance sheet flexibility, and provide general working capital for its return to profitability.

APX: Renewal Strategy

During the AGM, Appen unveiled its investor presentation, outlining its comprehensive renewal strategy. The company intends to adapt to the evolving AI landscape while capitalizing on emerging opportunities in generative AI and large language models. Appen aims to leverage its expertise and data services to stay at the forefront of AI development. By aligning its strategy with the growing demand for AI solutions, Appen seeks to navigate its current challenges and position itself as a leader in the AI industry.

Conclusion

Appen’s recent share price surge amidst a challenging market environment has reignited hope among investors. The company’s association with Nvidia and its active involvement in the AI sector has played a pivotal role in restoring market confidence. The rebound of the broader tech sector further supports Appen’s recovery, indicating a positive shift in market sentiment. While uncertainties persist, Appen’s focus on resetting the business, coupled with its renewal strategy, positions the company well to capitalize on the future growth potential of AI. As investors contemplate Appen’s entitlement offer, they cautiously assess whether the worst is behind the company or if further challenges lie ahead.

 

Are You Looking To Buy The Best Stocks In 2024?

Stay on top of upcoming market trends! Whether you are an SMSF investor or a young investor with your portfolio, we cover a wide range of stocks across all sectors, including mining, financials, industrials, real estate, technology, health and biotech, etc. It will give you an edge to invest and trade ASX listed stocks across large, mid and small caps with an advantage.

Get stock tips with our Market Experts. We help self-directed investors and self-managed super funds (SMSF) make smarter investment decisions and get better returns. Fill in your details and download your free Report instantly for Top 3 Dividend Stocks to buy in 2024!

 

Top 5 ASX Stocks
to Buy for Capital Growth in 2024

Shares In Value - Top 5 ASX Stocks to Buy - Cover 2024
The hardest part to finding growth stocks is having an ability to understand the finer details of these companies from their valuations through to first mover advantage and having key factors on hand to make informed investment decisions.

Our experts take the guesswork out.
ASX insight Stocks Landing

Download Your Free Report

By downloading this report, you agree to our terms and conditions and privacy policy

Scroll to Top

Login

By submitting this form, I agree to the TERMS AND CONDITIONS and PRIVATE POLICY

Income Stocks - Blogs

Please fill in your details to download the free dividend shares report.

By downloading this report, you agree to our terms and conditions and privacy policy

Just 10 Seconds Away From Your Free Report!
Income Stocks - Popup Blog

Please fill in your details to download the free dividend shares report.

By clicking 'Download Report', I accept the Privacy Policy and Member Terms & Conditions.

We will send your report instantly. Please put your correct email address and phone number.