Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
As one of the most discussed up and coming Australian companies this year , there is no doubt many people believe Appen will continue to rise come 2020. The artificial intelligence company has seen major success with their language tech data selling it to companies and government agencies across the globe. Appen boasts an impressive market cap of $3.18 billion as well as a PE ratio of 62.2 and EPS of 0.422. The 2017 acquisition of Leapforce added a 50% increase in revenue valuation, which was a main reason why the Appen share price rose 350% that year alone .
What’s next for Appen come 2020?
Appen has revealed that their demand is growing significantly throughout 2019 and is expected to outperform revenue targets by the end of the year. These upgraded guidance revenues have increased 10% from $85-90 m to $97-100m, a great sign for stock price growth and investors currently holding . This means Appen has grown year on year by roughly 35%, a feat many companies struggle to achieve. Appen has also forecasted industry revenue to grow to $36 billion by 2025. With strong revenue growth expected through 2020, Appen has already been picked as an important stock by brokers to have within your portfolio come 2020.
What’s the risk ?
If we break down the risk of Appen, we find the 5-year beta at 0.88. As described in other articles , the Beta will determine how much risk the investor is taking on when buying the stock. With a Beta of 0.88 it’s a very positive sign that Appen looks stable. As the Beta is below the market portfolio of 1. This means that in theory, when the market is down Appen will perform better than the market. However, this does not mean Appen holds no risk. Appen’s share price will face threats due to competition in 2020 as well as the systematic risks posed ; such as a Global economic slowdown that will effect demand for Appen product. However, I think the most significant risk for investors now is that Appen very well may be over-priced in terms of a short term investment. If you are planning to hold Appen for 5 years, from our research we believe there is no doubt the price will rise above its current of $24.60. Yet if you are looking to hold Appen for under a year, I have no doubt the risk of a loss will be very high.
After examining the opportunities that influence Appen’s share price , it looks potentially positive as a long term investment come 2020. However, investors must understand the risk factors Appen hold and whether they believe it will effect share price or not. The major key for investors in the Appen scenario is whether they believe the share is too overvalued for a short turnover or whether they are in it for the long haul . Either way, our research suggests Appen may hold a very positive and strong outlook come 2020.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Tyger Fitzpatrick , Founder of YIG