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Appen Ltd. (AU:APX)
ASX:APX
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Appen (APX) AI Stock Analysis

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AU:APX

Appen

(Sydney:APX)

Rating:39Underperform
Price Target:
AU$1.00
▲(8.70%Upside)
Appen Ltd.'s overall stock score is primarily impacted by its financial challenges, negative valuation metrics, and bearish technical indicators. Despite positive sentiment from the earnings call about profitability and AI growth, these factors are overshadowed by operational inefficiencies and revenue declines.

Appen (APX) vs. iShares MSCI Australia ETF (EWA)

Appen Business Overview & Revenue Model

Company DescriptionAppen Limited, together with its subsidiaries, operates as an AI lifecycle company that collects and labels image, text, speech, audio, video, and other data used to build and enhance artificial intelligence systems. It operates through two segments, Global Services and New Markets. The company offers data sourcing services, including image, video, speech, and text data collection services pre-labeled datasets of audio, image, video, and text; and language-based AI solutions. It also provides data preparation services comprising machine learning assisted data annotation tools, which include image annotation, video annotation, text, sensor, audio annotation, and other solutions; enterprise-ready data annotation platform, which offers smart labeling, workflows, in-platform audit, and enterprise analytics; and knowledge graph and ontology support services. The company was formerly known as Appen Holdings Pty Limited and changed its name to Appen Limited in October 2014. Appen Limited was founded in 1996 and is headquartered in Chatswood, Australia.
How the Company Makes MoneyAppen makes money through a combination of project-based and subscription revenue models. Their primary revenue stream comes from providing data annotation and data labeling services to clients who are developing AI and machine learning models. This includes tasks such as image and video annotation, text-to-speech data collection, and linguistic annotation. Appen also generates income from long-term contracts with major technology companies, which rely on Appen's scalable and flexible workforce to handle large volumes of data. Significant partnerships with tech giants and the increasing demand for AI and machine learning solutions contribute to Appen's earnings. Additionally, Appen has expanded its revenue streams by integrating machine learning technologies to enhance its service offerings, providing end-to-end AI solutions for enterprises.

Appen Earnings Call Summary

Earnings Call Date:Feb 25, 2025
(Q4-2024)
|
% Change Since: -68.06%|
Next Earnings Date:Aug 20, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive sentiment with significant achievements in profitability and revenue growth excluding the impact of Google. The company's strategic focus on generative AI and operational efficiency has driven success, particularly in the China market. However, challenges remain due to the termination of the Google contract and lower gross margins in China. The overall outlook for 2025 is optimistic, with a continued focus on leveraging growth opportunities in generative AI.
Q4-2024 Updates
Positive Updates
Return to Profitability
Appen achieved $3.5 million in underlying EBITDA in FY '24, up from a loss of $23.9 million in FY '23.
Revenue Growth Excluding Google
Group revenue grew 16% year-on-year if the impact of Google is excluded. Revenue for Q4 FY '24 grew by 37% compared to Q4 FY '23, reaching $66.7 million.
Strong Growth in China
China experienced a 71% year-on-year growth, driven by major LLM model builders and leading technology companies.
Generative AI Revenue Surge
Generative AI-related projects accounted for 28% of revenue in H2 FY '24, up from 6% in H2 FY '23.
Operational Cost Reduction
Operational expenses were reduced by 26% compared to FY '23, contributing to profitability.
Cash Balance Increase
The cash balance increased to $58.4 million, up $22.7 million from December '23.
Negative Updates
Total Revenue Decline
Total revenue decreased 14% to $234.3 million due to the termination of the Google contract.
Google Contract Termination
The termination of the Google contract led to a 38% decrease in Global Services revenue to $118.1 million.
Lower Gross Margins in China
Despite impressive growth, the gross margins for China are generally lower than other divisions.
Uncertainty in Enterprise and Government Segments
Revenue decreased due to lower volumes in large enterprise projects and infrequent government awards.
Company Guidance
In the conference call, Appen provided significant guidance on their financial performance and strategic outlook. For FY '24, the company achieved a 16% revenue growth year-on-year, excluding the impact of Google, with China experiencing a remarkable 71% growth. The company also returned to profitability, achieving $3.5 million in underlying EBITDA, a substantial improvement from a loss of $23.9 million in FY '23. In the fourth quarter, revenue excluding Google grew 37% compared to Q4 FY '23, reaching $66.7 million. Operationally, Appen managed to reduce operating expenses by 26% compared to the previous year. Their AI data annotation platform, ADAP, is increasingly crucial for large technology companies, especially in large language model (LLM) projects, with 28% of H2 FY '24 revenue coming from generative AI-related projects, up from 6% in H2 FY '23. Looking forward to 2025, Appen anticipates continued growth in LLM-related projects, although they expect month-to-month revenue variability due to the rapidly evolving market. They remain focused on maintaining tight cost controls and achieving ongoing cash EBITDA positivity.

Appen Financial Statement Overview

Summary
Appen Ltd. is facing significant financial challenges with declining revenues, profitability, and cash flow generation. Despite a stable equity base, operational inefficiencies and cash flow constraints pose major issues.
Income Statement
40
Negative
Appen Ltd. has experienced a significant decline in revenue and profitability over recent years. The gross profit margin remains notably low, and the company reported negative net income for the last three years, indicating challenges in maintaining profitability and revenue growth. The lack of EBIT and negative EBITDA margin highlight operational inefficiencies.
Balance Sheet
55
Neutral
The company's balance sheet shows a relatively stable equity position, but the debt-to-equity ratio has been increasing due to rising liabilities. The equity ratio remains healthy, suggesting a solid asset base. However, the declining return on equity indicates that the company is struggling to generate returns from shareholder investments.
Cash Flow
30
Negative
Appen Ltd. faces issues with negative free cash flow and inconsistent operating cash flows, reflecting challenges in generating cash from its core operations. The free cash flow to net income ratio is unfavorable, indicating difficulties in converting income into cash flow.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue234.28M411.31M559.89M595.75M599.39M
Gross Profit11.34M42.12M10.07M93.01M111.80M
EBITDA3.34M-89.37M-283.44M96.31M81.20M
Net Income-20.01M-118.08M-344.86M28.52M38.84M
Balance Sheet
Total Assets170.59M155.16M375.94M690.68M598.21M
Cash, Cash Equivalents and Short-Term Investments54.81M32.15M34.55M65.85M78.39M
Total Debt11.04M12.43M15.01M20.71M25.23M
Total Liabilities56.27M62.36M157.72M151.69M113.94M
Stockholders Equity114.32M136.00M218.22M538.99M484.27M
Cash Flow
Free Cash Flow-13.51M-42.79M-14.00M41.07M63.51M
Operating Cash Flow-1.01M-33.66M26.29M71.84M94.02M
Investing Cash Flow-13.08M-31.48M-46.33M-67.71M-70.92M
Financing Cash Flow37.74M77.28M-13.74M-18.85M-11.85M

Appen Technical Analysis

Technical Analysis Sentiment
Negative
Last Price0.92
Price Trends
50DMA
1.11
Negative
100DMA
1.06
Negative
200DMA
1.71
Negative
Market Momentum
MACD
-0.04
Positive
RSI
34.95
Neutral
STOCH
8.37
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AU:APX, the sentiment is Negative. The current price of 0.92 is below the 20-day moving average (MA) of 1.11, below the 50-day MA of 1.11, and below the 200-day MA of 1.71, indicating a bearish trend. The MACD of -0.04 indicates Positive momentum. The RSI at 34.95 is Neutral, neither overbought nor oversold. The STOCH value of 8.37 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AU:APX.

Appen Peers Comparison

Overall Rating
UnderperformOutperform
Sector (56)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
66
Neutral
AU$104.64M11.4312.90%4.16%23.66%-7.71%
66
Neutral
AU$311.17M22.986.32%32.40%-2.97%
63
Neutral
AU$103.70M120.003.26%5.37%-45.95%
61
Neutral
AU$108.29M-7.65%20.24%27.33%
56
Neutral
$292.64M11.36-17.16%2.59%10.30%-47.61%
54
Neutral
AU$176.40M33.61-5.30%15.87%-160.30%
39
Underperform
$242.39M-19.32%-13.61%86.37%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
AU:APX
Appen
0.93
0.15
18.59%
AU:KYP
CV Check Ltd
0.24
0.13
118.18%
AU:ATA
Atturra Limited
0.82
0.02
2.50%
AU:CCR
Credit Clear Limited
0.24
-0.04
-14.29%
AU:COS
Cosol Limited
0.57
-0.50
-46.73%
AU:DUG
DUG Technology Ltd
1.28
-1.34
-51.15%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 31, 2025