Why the Appen Ltd (ASX:APX) share price is racing higher today

One of the best performers on the ASX 200 this morning has been the Appen Ltd (ASX: APX) share price.

At the time of writing the shares of the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence are up 7% to $13.59.

Why are Appen’s shares racing higher today?

A portion of today’s gain is likely to be attributable to a strong night of trade for U.S. tech stocks which has lifted the local tech sector. The likes of Afterpay Touch Group Ltd (ASX: APT) and Altium Limited (ASX: ALU) are all notably higher as well this morning.

Another key catalyst for today’s share price gain could be a positive broker note that was released this morning.

According to a note out of UBS, it has upgraded Appen’s shares to a buy rating from neutral and increased the price target on them to $16.00.

The broker made the move after a global tech selloff pulled down valuations meaningfully over the last couple of months.

In addition to this, Appen’s recent EBITDA guidance upgrade caught the eye of its analysts.

Earlier this month Appen lifted its guidance for underlying EBITDA for the 12 months ending December 31 to be in the range of $62 million to $65 million. This will be a 120% to 131% increase on FY 2017’s result.

This upgrade and positive industry feedback gave UBS the confidence to revise its estimate higher for FY 2019.

UBS now expects earnings per share of 39.4 cents in FY 2018 and 49.7 cents in FY 2019. Which means Appen’s shares are changing hands at 27x estimated FY 2019 earnings.

Should you invest?

I don’t think that 27x estimated FY 2019 earnings is overly demanding for a company that looks set to benefit greatly from machine learning and artificial intelligence markets that are expected to grow at a strong rate over the next decade.

In light of this, Appen remains my favourite WAAAX share to buy right now, just ahead of Altium.

As well as Appen, I think these growth shares would be great investments for 2019. Do you own them?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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