Why the Appen (ASX:APX) share price is racing 5% higher today

The Appen Ltd (ASX:APX) share price is racing 5% higher on Wednesday. Here’s what is causing investors to buy its shares today…

| More on:
Young woman in yellow striped top with laptop raises arm in victory

Image source: Getty Images

The Appen Ltd (ASX: APX) share price has been a particularly positive performer on Wednesday.

The artificial intelligence data services company’s shares are up a sizeable 5% to $15.92 at the time of writing.

Why is the Appen share price racing higher?

Investors have been buying Appen’s shares following the release of a broker note out of Macquarie Group Ltd (ASX: MQG) this morning.

According to the note, the broker has upgraded its shares from an underperform rating to neutral. Macquarie has, however, held firm with its price target of $16.00.

Its analysts made the move following a sharp decline in the Appen share price since they downgraded it to underperform in the middle of February.

Macquarie notes that the Appen share price had lost approximately a third of its value since that point, prior to today.

What else did Macquarie say?

Although Macquarie has upgraded its shares on valuation grounds, it has warned investors not to get too excited.

While it acknowledges that Appen has a strong position in the market, which gives it some pricing power, it does have concerns that price competition could potentially lead to larger than expected earnings downgrades in the future.

The broker has warned that this may not be fully priced into current valuations.

Bullish broker

Macquarie may not be overly bullish, but one broker appears to be.

A note out of Citi from earlier this month reveals that its analysts have retained their buy rating and $30.90 price target on the company’s shares.

Based on the current Appen share price, this implies ~94% upside over the next 12 months.

It has been looking at industry developments and believes they are pointing to solid growth in the artificial intelligence training data industry.

Though, it does acknowledge that with many of its competitors raising funds, Appen may need to increase its investment in product development to stay ahead of the pack.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers