Why are brokers so divided on the Appen (ASX:APX) share price?

Where next for Appen's shares?

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The Appen Ltd (ASX: APX) share price is under pressure again on Thursday.

In afternoon trade, the artificial intelligence data services company's shares are down 3.5% to $9.47.

This means the Appen share price is now down 14% since this time last week and 63% in 2021.

Two people jump in the air in a fighting stance, indicating a battle between rival ASX shares.

Image source: Getty Images

Where next for the Appen share price?

Where the Appen share price goes next is very difficult to say. In fact, the broker community is incredibly divided on the matter.

In the bear corner, there is the team at Macquarie Group Ltd (ASX: MQG). Last week its analysts downgraded the company's shares to an underperform rating and slashed the price target on them by ~20% to $9.50.

Its analysts have been speaking to industry contacts and believe structural shifts could be impacting demand for Appen's services.

Macquarie understand that many big tech companies are now bypassing Appen and other third-party data annotation service providers due to tighter privacy and data retention standards. This has led to tech companies developing their own crowd-sourcing solutions for data annotation.

The broker feels this will lessen demand for Appen's services and suspects it could fall short of the market's expectations and its own guidance.

What about the bulls?

The team at Citi remain positive on the Appen share price and have a buy rating and $17.10 price target on it.

This price target implies potential upside of approximately 80% for its shares over the next 12 months.

While the broker notes that Appen will need a strong second half to achieve its full year guidance, it was pleased to see increased traffic to Google and Facebook's sites in October. Citi feels this bodes well for data annotation demand. This is further supported by a strong third quarter update from industry rival Telus International last month.

Which broker makes the right call, only time will tell. But investors may not need to wait long. Appen released a trading update during the second week of December last year. This would mean an update is imminent if it chooses to do the same again this year.

Motley Fool contributor James Mickleboro 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 Australia has recommended Macquarie Group Limited. 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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