The Appen Ltd (ASX: APX) share price has been on form again on Tuesday and charged higher.
The shares of the global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence (AI) have climbed 3% to hit a new record high of $36.90.
This latest gain means that Appen's shares have now rocketed 135% higher since hitting a 52-week low of $15.70 in March.
Is it too late to buy Appen shares?
Based on the current Appen share price, I estimate that its shares are changing hands at approximately 43x FY 2021.
While this is certainly a premium to the market average and does mean they carry a lot of risk, I still see a lot of value in Appen's shares for long-term focused investors.
Last year a company presentation advised that the AI market is expected to grow to be worth between US$169 billion and US$191 billion per annum by 2025.
This puts Appen in a particularly strong position for growth, because an estimated 10% of spending in this market goes towards data labelling. That means Appen's addressable market could be worth US$17 billion to US$19 billion in five years.
This is materially more than the revenue of $536 million it generated in FY 2019.
And given the company's leadership position in the market and its high quality customer base, I believe it is well-positioned to grow its market share strongly over the next decade.
Especially following the acquisition of Figure Eight. This business has a strong position in the government sector and looks well-placed to capture a slice of growing government spending on AI.
For example, Appen has previously noted that the US government has a US$5 billion AI budget and the UK government has a £2.3 billion AI budget.
Foolish Takeaway.
Although Appen's shares are not cheap, I believe its extremely positive long-term outlook justifies the premium.
As a result, I think they would be great buy and hold options along with fellow tech shares Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO).
