Appen (APX) AI Stock Analysis

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Appen

(Sydney:APX)

Rating:51Neutral

Price Target:

AU$1.00

▼(-2.91%Downside)

Appen Ltd.'s overall score is primarily impacted by its financial challenges, including declining profitability and revenue. However, the positive sentiment from the latest earnings call, highlighting a return to profitability and growth in generative AI projects, provides a positive outlook. Despite technical indicators suggesting neutral momentum, the valuation remains a significant concern due to the negative P/E ratio and lack of dividends.

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

Market Cap

$260.93M

Dividend YieldN/A

Average Volume (3M)10.31M

Price to Earnings (P/E)―

Beta (1Y)2.63

Revenue Growth-13.61%

EPS Growth86.37%

CountryAU

Employees1,130

SectorTechnology

Sector Strength83

IndustryInformation Technology Services

Share Statistics

EPS (TTM)-0.01

Shares Outstanding264,902,700

10 Day Avg. Volume7,438,198

30 Day Avg. Volume10,312,498

Financial Highlights & Ratios

PEG Ratio<0.01

Price to Book (P/B)1.52

Price to Sales (P/S)0.00

P/FCF Ratio-23.63

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$2.35

Price Target Upside127.89% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

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 Ltd. primarily makes money by offering data solutions and services which are critical for training and improving artificial intelligence and machine learning models. The company's revenue model includes key streams such as data collection, data annotation, and linguistic services. These services are provided on a contractual basis to major technology firms and other enterprises looking to enhance the performance of their AI systems. Appen leverages a global crowd workforce to deliver these services at scale, which allows them to meet the diverse needs of their clients. Significant partnerships with leading technology companies contribute to Appen's earnings by securing long-term contracts and projects that require ongoing data services.

Appen Earnings Call Summary

Earnings Call Date:Feb 25, 2025

(Q4-2024)

% Change Since: -64.24%|

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

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

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

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.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
234.28M	411.31M	559.89M	595.75M	599.39M
	Gross Profit
11.34M	42.12M	10.07M	93.01M	111.80M
	EBIT
-21.67M	-85.97M	-40.91M	58.70M	58.71M
	EBITDA
3.34M	-89.37M	-283.44M	96.31M	81.20M
	Net Income Common Stockholders
-20.01M	-118.08M	-344.86M	28.52M	38.84M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
54.81M	32.15M	34.55M	65.85M	78.39M
	Total Assets
170.59M	155.16M	375.94M	690.68M	598.21M
	Total Debt
11.04M	12.43M	15.01M	20.71M	25.23M
	Net Debt
-43.77M	-19.72M	-19.54M	-45.14M	-53.16M
	Total Liabilities
56.27M	62.36M	157.72M	151.69M	113.94M
	Stockholders Equity
114.32M	136.00M	218.22M	538.99M	484.27M
Cash Flow		Free Cash Flow
-13.51M	-42.79M	-14.00M	41.07M	63.51M
	Operating Cash Flow
-1.01M	-33.66M	26.29M	71.84M	94.02M
	Investing Cash Flow
-13.08M	-31.48M	-46.33M	-67.71M	-70.92M
	Financing Cash Flow
37.74M	77.28M	-13.74M	-18.85M	-11.85M

Appen Technical Analysis

Technical Analysis Sentiment

Negative

Last Price1.03

Price Trends

50DMA

1.01

Positive

100DMA

1.46

Negative

200DMA

1.82

Negative

Market Momentum

MACD

-0.02

Positive

RSI

46.45

Neutral

STOCH

22.79

Neutral

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 1.03 is below the 20-day moving average (MA) of 1.12, above the 50-day MA of 1.01, and below the 200-day MA of 1.82, indicating a neutral trend. The MACD of -0.02 indicates Positive momentum. The RSI at 46.45 is Neutral, neither overbought nor oversold. The STOCH value of 22.79 is Neutral, 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 (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ATA	74 Outperform	AU$303.71M	22.56	6.32%	―	32.40%	-2.97%
KYP	69 Neutral	AU$79.94M	95.00	3.26%	―	5.37%	-45.95%
COS	67 Neutral	AU$90.99M	9.94	12.90%	4.00%	23.66%	-7.71%
Sector *	62 Neutral	$11.91B	9.99	-7.22%	4.96%	7.31%	-8.91%
DUG	58 Neutral	AU$179.77M	33.61	-5.30%	―	15.87%	-160.30%
CCR	55 Neutral	AU$91.30M	―	-7.65%	―	20.24%	27.33%
APX	51 Neutral	$260.93M	―	-19.32%	―	-13.61%	86.37%

* Technology Sector Average

Performance Comparison

AU:APX

Appen

1.03

0.55

114.58%

AU:KYP

CV Check Ltd

0.18

0.09

100.00%

AU:ATA

Atturra Limited

0.81

0.09

12.50%

AU:CCR

Credit Clear Limited

0.23

-0.03

-11.54%

AU:COS

Cosol Limited

0.50

-0.67

-57.26%

AU:DUG

DUG Technology Ltd

1.34

-1.29

-49.05%

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.