The Appen Ltd (ASX: APX) share price has been in a bit of a sorry state for a while now. Appen shares have dived today, for one. The All Ords tech share is currently down by a nasty 3.91% at $2.70 a share so far this Tuesday. But Appen's woes didn't start today.
This is a company that once commanded a share price of more than $40, back in late 2020. Since that heyday, Appen has lost more than 93% of its value. Today, the company is worth just over $345 million and has lost its coveted spot in the S&P/ASX 200 Index (ASX: XJO).
In fact, Appen shares have spent the past few days undergoing another precipitous drop. It was only last Friday that this ASX artificial intelligence (AI) share was above $3.30 a share, meaning Appen has lost more than 18% of its value in just a few trading days:
Appen actually had a pretty positive start to the year. Between the start of January and 10 February, the company rose more than 26%. As we covered last week, this could have been a result of investor optimism over AI and the dramatic emergence of OpenAI's ChatGPT software.
But that all came crashing down yesterday. This saw Appen announce to the markets that it is now expecting to book a pre-tax impairment charge worth $204 million for the 2022 calendar year. According to the company, this "reflects the impairment of goodwill and certain intangibles…".
So with Appen losing some of its 2023 steam, could the shares finally be cheap enough to buy? Or is this ASX AI share a falling knife to be avoided?
Are Appen shares cheap enough for the buy zone yet?
Well, one ASX expert seems to think the situation resembles the latter scenario.
As reported in the Australian Financial Review (AFR) this week, RBC Capital Markets' Garry Sherriff has a pretty negative view. Sherriff is a managing director and lead technology analyst at RBC. Here's some of what he said on Appen following its impairment announcement:
The impairments indicate some value destruction in prior investments, so although no cash or covenant impacts, it reflects the strategy for New Markets has performed materially worse than management expected in our view.
The negative jaws spiral continued with customer headwinds exacerbated by Appen's higher spend on technology and product investment. Although revenue guide [was] reiterated, the market [is] likely sceptical given customer headwinds.
So that's definitely not an optimistic outlook for Appen. It seems unlikely that Scherriff sees Appen shares as cheap enough to buy after what the company had to say yesterday.
