Appen share price tipped to hit $28.00 in 2019

The Appen Ltd (ASX:APX) share price has been tipped to climb to $28.00 by one leading broker in 2019. Should you invest?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Appen Ltd (ASX: APX) share price returned from its trading halt on Tuesday and tumbled 9% lower to $22.14.

Despite this decline the shares of the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence are still up 72.5% since the start of the year.

This makes Appen the best performer on the ASX 200 in 2019 ahead of payments company Afterpay Touch Group Ltd (ASX: APT) and iron ore producer Fortescue Metals Group Limited (ASX: FMG).

Is it too late to buy Appen shares?

I don't believe it is too late to invest in Appen, especially if you're prepared to make a buy and hold investment.

I'm not alone with this view. According to a note out of Citi on Tuesday, the broker has upgraded Appen's shares to a buy rating from neutral and lifted the price target on them by 20% to $28.04 following the acquisition of the Figure Eight business.

This price target implies potential upside of almost 27% for its shares over the next 12 months.

Figure Eight is a best in class machine learning software platform which uses highly automated annotation tools to transform unstructured text, image, audio and video data into customised high-quality artificial intelligence training data.

Citi believes that Figure Eight is a good fit for Appen and expects it to provide the technology and expertise required to allow the company to scale and improve its productivity materially.

However, as the Figure Eight business made a loss in FY 2018, the broker expects it to act as a drag on Appen's performance this year. As a result, it has lowered its earnings estimates slightly for FY 2019.

After which, it believes the business will contribute strongly to Appen's FY 2020 and FY 2021 results.

I think Citi makes a great point on Appen and believe it is a quality investment option. Its shares are trading at a premium to the market average, though. Whilst I believe its strong growth potential justifies this, they are still a reasonably high risk option and could be unsuitable for investors with a low tolerance for risk. It is also worth noting that Citi handled the capital raising to fund the acquisition of Figure Eight.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO 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.

More on Growth Shares

chart showing an increasing share price
Growth Shares

Buy these excellent ASX growth shares for 15% to 20% returns

Analysts think big returns could be on the cards for owners of these shares.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Growth Shares

These ASX 200 growth shares could rise 12% to 30%

Analysts think big returns could be on offer from these shares.

Read more »

Man in an office celebrates at he crosses a finish line before his colleagues.
Growth Shares

Hoping to beat the ASX 200? I'd consider buying these 3 ASX shares

Analysts think these shares can outperform the market.

Read more »

a happy investor with a wide smile points to a graph that shows an upward trending share price
Growth Shares

5 top ASX growth shares to buy in April

Analysts think growth investors should be buying these shares.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Growth Shares

These mid-cap ASX shares could rise 20% to 50%

Goldman Sachs is tipping these stocks as buys.

Read more »

A happy boy with his dad dabs like a hero while his father checks his phone.
Growth Shares

2 ASX growth shares that could turn $1,000 into $10,000 by 2034

I think these two stocks have a shot at being 10-baggers.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Growth Shares

These top ASX 200 growth shares can rise 10% to 50%

Analysts see major upside ahead for these buy-rated shares.

Read more »

A young man wearing glasses writes down his stock picks in his living room.
Growth Shares

I think this ASX growth stock has market-beating potential

I'm betting that this investment will crush the ASX over the next few years.

Read more »