Why is the Appen share price diving 10% on Monday?

The artificial intelligence (AI) data services company saw its shares rocket last week but is giving some of those gains back today.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published February 13, 2023 11:28 am AEDT

The Appen Ltd (ASX: APX) share price is taking a tumble, down 9.9% in Monday morning trade.

The artificial intelligence (AI) data services company saw its shares rocket last week, gaining 28% over the past four trading days. With no price-sensitive news out last week, that surge looks to have been driven by investor exuberance surrounding OpenAI's ChatGPT.

But after Appen reported that it expects a significant non-cash impairment charge, investors are hitting the sell button today.

Disappointed man with his head on his hand looking at a falling share price his a laptop. — Image source: Getty Images

Why the impairment charge?

The Appen share price is under pressure after the company reviewed the value of cash generating units (CGU) and its assets. Following that review, the ASX tech stock said it expects to recognise a non-cash, pre-tax impairment charge of $204 million in its financial results for the year ended 31 December.

The company said the charge "reflects the impairment of goodwill and certain intangibles associated with the new markets (excluding China) CGU". These are comprised of the Global Product, Enterprise, Government and Quadrant business units.

Also likely pressuring the Appen share price today is the company's reduction in future revenue growth assumptions.

As the impairment is non-cash and a non-operating item, underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) and underlying net profits after tax (NPAT) won't be impacted. And Appen highlighted that it found no indicators of impairment in its larger Global Services CGU.

Appen is scheduled to release its full-year results on 27 February.

The ASX tech stock said it expects to report revenue at the higher end of its guidance range of US$375 million to US$395 million. EBITDA is expected to come in at the lower end of the guidance range of US$13 million to US$18 million.

Appen share price snapshot

As you can see in the chart below, the Appen share price was enjoying a strong rebound in 2023. Even with today's big slide factored in, the ASX tech share remains up 20% year to date.

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