Appen Ltd (ASX: APX) shares will be worth watching like a hawk next month when the artificial intelligence data services company releases its half-year results.
Particularly after its last results release in February, which disappointed the market and sent its shares crashing deep into the red.
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What is Appen guiding to this time around?
Expectations are low for Appen's half-year results next month. That's because management is guiding to a weak first-half followed by a much stronger second-half to FY 2022.
In May, the company provided a trading update which stated the following:
The company expects 1H FY22 EBITDA to be materially lower than the prior corresponding period [FY21 H1 – US$27.7 million] due to lower than expected revenue and reflecting investment in our transformation office, product and technology and lower share based payments in the prior corresponding period. The company expects FY22 EBITDA to be significantly weighted to 2H reflecting the revenue skew and fixed cost operating leverage.
What is the market expecting?
According to a recent note out of Bell Potter, its analysts believe "materially lower" underlying EBITDA will mean US$17.3 million for the half. This represents a decline of 37.5% over the prior corresponding period.
This certainly puts Appen in a difficult position to deliver full-year operating earnings in excess of the US$78.9 million reported in FY 2021.
So much so, the market is now forecasting an earnings decline in FY 2022. Current consensus estimates are for EBITDA of US$72.7 million this year, which will mean a year on year decline of 7.9%. But even that may prove ambitious based on its poor start to the financial year.
Time will tell what happens. But with the Appen share price down 46% in 2022, shareholders will no doubt be hoping for a positive surprise to get its shares heading higher at long last.
