Could this imply light at the end of the tunnel for Appen shares?

Appen stock has come under heavy selling pressure this year alongside some of its biggest customers.

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Key points

  • Appen shares are down 77% in 2022
  • The artificial intelligence data services company’s major customers include Meta and Alphabet, both of which have struggled this year
  • The big US tech stocks are still seen to be “secular growers”

Appen Ltd (ASX: APX) shares are up 2% in morning trade, having opened 2.5% higher.

This will come as welcome news to shareholders in the beleaguered artificial intelligence data services company.

Appen shares have come under heavy selling pressure this year alongside some of its biggest customers and revenue earners, like Alphabet Inc. (NASDAQ: GOOGL) and Meta Platforms Inc (NASDAQ: META).

Or Google and Facebook, to you and me.

The Meta share price is down a whopping 71% this calendar year, while Alphabet's shares have plunged 39%.

Little wonder then that the Appen share price has also been in freefall.

But there may be a light at the end of the tunnel for the ASX tech stock's shareholders.

Why the picture could be getting brighter

With Appen's share performance significantly impacted by the outlook for the big US tech stocks, Julian Emanuel, senior managing director at Evercore ISI, offers a fairly bullish forecast.

Emanuel said investors shouldn't conflate this year's tech woes with the dotcom-bubble burst in 2000, indicating the tech sector will rise again.

According to Emanuel (quoted by Bloomberg), "This is not like 2000. Over the last 10 years we have gotten to this point where the returns were driven by a handful of stocks."

The handful of stocks in question include Meta and Alphabet, part of the so-called giant tech FAANG stocks. (Though with the Facebook and Google name changes, the proper acronym would now be MAANA, not quite as catchy.)

Emanuel said the FAANG (or MAANA) stocks are likely to trade in a tight range from here until "earnings catch up to valuations".

"Long-term, those are still secular growers; they're just not going to prop up the market to the extent that they have," he said, in what could prove to be good news for Appen shares down the road.

How have Appen shares been tracking?

Appen shares are down a painful 77% in 2022. For some context, the All Ordinaries Index (ASX: XAO) is down 10% year to date.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Appen Ltd, and Meta Platforms, Inc. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Meta Platforms, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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