The Appen Ltd (ASX: APX) share price is pushing higher today at long last.
In afternoon trade, the artificial intelligence data services company's shares are up 1% to $11.33.
Though, with the Appen share price still down 55% since the start of the year, it is far too soon to start celebrating.
Why is the Appen share price down 55% in 2021?
One word arguably sums up the reason for the decline in the Appen share price this year – uncertainty.
And uncertainty, as we have seen also with A2 Milk Company Ltd (ASX: A2M), does not mix well with high earnings multiples.
For a company to be able to command a sky high earnings multiple, there has to be some level of confidence that it will deliver on the market's growth expectations.
For Appen, through no fault of its own, this simply isn't the case right now because of the impact COVID-19 has had on the industry.
Lack of visibility
A recent note out of Bell Potter sums up exactly what the market is thinking and why the Appen share price is languishing in 2021.
It commented: "Appen delivered a speech at a broker conference that in our view was full of mixed messages and provided little clarity on how the company is tracking this year. The speech seemed to be aimed at providing an update on current market conditions and responding to some of the negative commentary in various recent broker reports on increased competition and self-supervised machine learning. Notably, there was no mention of the 2021 guidance."
"Our overall impression of the speech was some of the challenges from last year are still ongoing but this relates more to customer behaviour and spending patterns rather than a shift in market dynamics and the competitive environment. We now wait for the AGM at the end of the month for a likely update on the 2021 guidance," it concluded.
Bell Potter currently has a hold rating and $13.25 price target on its shares. It also estimates that its shares are trading at 24x FY 2021 earnings and 20x FY 2022 earnings at present.
And while the broker's price target implies decent upside for the Appen share price over the next 12 months, it is worth remembering that this target could change depending on how the annual general meeting update goes.
