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.
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.