Appen share price (ASX:APX) up 6% ahead of earnings this week

Let's take a closer look.

| More on:
share price gaining

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Appen Ltd (ASX: APX) share price has walked through the session in the green during trade on Monday.

Appen shares are on the move ahead of the artificial intelligence (AI) company's earnings report due on Thursday.

Let's investigate further.

A bit more on Appen

Appen is a "global leader" in human annotated training data for machine learning and AI. It has two main segments, content relevance and speech collection.

Its language technology is used in over 150 languages and dialects by technology companies and various governments.

Appen has a market capitalisation of $1.47 billion at the time of writing.

What's behind the Appen share price ahead of its earnings report?

Over the last week, Appen shares have gathered momentum on the charts, climbing from lows of $11.32 on 17 August.

There has been no market-sensitive information by the company over this time. However, investment bank Citi holds an $18 per share price target on Appen shares.

The broker feels that, because many of Appen's large customers have recognised an accelerated growth period in revenue this year, Appen is well-positioned to benefit from this.

On this note, given the market's reaction to Appen's FY20 earnings report back in February, it may be that investors are seeing the strengths of its end-markets as a plus for the Appen share price.

What else?

As such, investors may be banking on an earnings surprise in its report on Thursday, where it would beat guidance on revenue, EBITDA and/or net profit after tax (NPAT).

An earnings beat is typically associated with positive sentiment, and investors may be seeking to enter a position early in order to capture any upward movements in the Appen share price post-earnings.

To illustrate, recall that after its last earnings report in February, the Appen share price sunk 7% on the day it was released. That's despite the fact the company grew revenues by 12% and EBITDA by 8% over the year.

However, management downgraded guidance in the report and then subsequently again in May. Thus, Appen shares have faced selling pressure over the last few months.

For instance, in May, the company forecasted an EBITDA range of US$83–$90 million, down from US$120–$130 million in its FY20 report.

However, even this figure signifies an 18%–28% year on year growth pattern from the year prior.

Therefore, without any additional news related catalysts, it therefore stands to reason that investors may be pushing the Appen share price higher in anticipation of a strong performance in its FY21 half year results on Thursday.

Appen share price snapshot

Appen shares have posted a year to date loss of 48%, extending the previous 12 month's loss of 68%.

Despite this, Appen shares are up 9.4% over the last week. Further, they are around 2% in the green over the last month.

These results have lagged the S&P/ASX 200 Index (ASX: XJO)'s return of around 25% over the past year.

As mentioned, investors can expect the company's FY21 half year earnings report on Thursday. Remember, this may be subject to change, so keep an eye out.

The author Zach Bristow has no positions 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.

More on Share Gainers

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »