Here’s why the Appen (ASX: APX) share price is down 50% in 2021 so far

Why have Appen shares had such a dreadful month, and year?

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The Appen Ltd (ASX: APX) share price hasn’t exactly been a top performer recently. Aside from the 3% the shares have lost just today, Appen is also down 14.75% over the past month, 50% in 2021 so far and 66% over the past 12 months.

It seems the tech company’s reputation as a red hot ASX growth share delivering double-digit returns year in, year out are long gone — at least for now.

So why has Appen had such a year to forget, especially the past month’s woes?

After all, other ASX tech shares were smashed last year with the onset of the global pandemic. But today, the S&P/ASX All Technology Index (ASX: XTX), of which Appen is a component, is still up almost 28% over the past 12 months. So why is Appen is dragging the chain here?

A year to forget

A number of factors have been working against Appen recently. The company is still struggling to regain its strength following the initial shock of the pandemic last year.

The company has been forced to downgrade its earnings guidance for one. The subsequent share price drops resulting from this also ensured Appen was booted out of the ASX 100 Index, likely further reducing buying pressure.

Additionally, Appen is a company that reports in US dollar terms. And the Aussie has spent the past year mostly rising against the greenback. This is another headwind the company has had to face.

Finally, an announced restructure hasn’t exactly calmed investors either. My Fool colleague James revealed earlier this month that a large institutional investor had pulled the plug on an $8 million parcel of shares.

Where to next for the Appen share price?

One potential catalyst for Appen that may become relevant in the near term is a potential takeover offer. As my Fool colleague Tristan covered earlier this month, broker Citi has described Appen as a takeover target due to its current depressed share price.

The broker noted that Appen’s rival Lionbridge has recently been acquired at a 16x – 20x earnings multiple, which makes Appen’s current multiple of 13x look objectively attractive.

We’ll have to wait and see if anything comes of this speculation, but it’s certainly a situation worth keeping in mind. Especially if you’re currently an Appen shareholder.

At the current Appen share price of $12.39, the company has a market capitalisation of around $1.55 billion.

Should you invest $1,000 in Appen right now?

Before you consider Appen, you'll want to hear this.

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The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

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

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