The Appen Ltd (ASX: APX) share price has continued a horrid run on the ASX this year, flopping 66% to levels not seen since mid-2017.
Let's journey back to see what's gone wrong for the Appen share price before taking a look at where it could be heading next.
What's been driving the Appen share price lower?
Formerly an ASX tech darling, the Appen share price hit an all-time high of $43.50 on 26 August 2020.
The following day, Appen released its first-half 2020 results. Results that failed to meet investors' expectations, sparking the start of the sell-off for Appen shares.
But the sell-down really gathered steam when Appen downgraded guidance in December 2020 and detailed a number of operational headwinds.
Since then, Appen has restructured its business, acquired location data company Quadrant, missed guidance in FY21, and received a takeover bid in May this year at $9.50 per share.
The bid came and went in a flash, with Canadian firm Telus withdrawing its offer soon after it was made public.
Appen's first-half 2022 results last month only added more salt to shareholders' wounds, with the business still battling operational challenges.
In the six months to 30 June 2022, revenue backtracked 7% to US$183 million while underlying EBITDA cratered 69% to US$8.5 million.
Explaining the disappointing performance, Appen's CEO Mark Brayan said:
The first half of the financial year has been characterised by challenging external operating and macro conditions, which has resulted in weaker digital advertising demand, and a slowdown in spending by some of our major customers.
Is Appen a buying opportunity?
Appen shares have already suffered a mighty fall from grace. But a leading broker thinks there could be more pain in store.
On the back of Appen's first-half result, Macquarie retained its underperform rating on Appen shares. The broker trimmed its 12-month price target to $3.30. This implies a potential downside of 12% compared to the current Appen share price of $3.76.
Macquarie noted that Appen is making strong strides in China and is diversifying its customer base. However, customer concentration risk remains high, with major customers contributing 81% of total revenue in HY22.
The broker believes the Appen share price could surprise to the upside if the company achieves faster than expected growth in China. Plus, a potential increase in demand for annotation services outside of big tech could drive an acceleration in the growth of overall demand.
In Macquarie's eyes, downside risks include a larger trend in big tech to move away from external vendors like Appen and instead complete annotation in-house. The broker also pointed to potential pricing pressure from a new increased competition landscape.
Appen share price snapshot
At $3.76, the Appen share price has wilted 91% from the all-time high it achieved in 2020.
Over the last 12 months, Appen shares are printing a 62% fall.
In comparison, the S&P/ASX 200 Index (ASX: XJO) has retreated 6% across the same period. Meanwhile, the S&P/ASX All Technology Index (ASX: XTX) has shed 30%.
Formerly a multibillion-dollar company, Appen currently commands a market capitalisation of just $464 million.
