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.
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.