Given the growing excitement around artificial intelligence (AI) and its rapid expansion, it makes sense to keep an eye on stocks in this sector, such as Appen Limited (ASX:APX).
According to its website, Appen empowers companies to seamlessly transition from pilot to production 3.4 times faster. It also states it has comprehensive solutions tailored to every phase of the AI journey.
Being in such an exciting growth area, you would think Appen’s share price would be booming, but instead, it has been falling over the past 36 months. Appen’s shares hit an all-time high of $42.44 in August 2020 and three years later they closed at $1.48 at the end of August 2023.
Given this, you may be asking why I have been interested in this stock. As you know, I like to take a contrarian approach to investing because what goes up must come down and when looking at good companies what goes down must also rise at some point. As such, I believe Appen will turn to rise strongly, but the big question is when.
Digging deeper
On Monday Appen released its results for the 2023 half year and it’s easy to see why its share price has been falling. In fact, after releasing its report this week, Appen fell over 30% as revenues were down 24% compared to the first half of 2022. So, the numbers don’t look good, but if we dig a little deeper, we find that Appen has no debt and it is cashed up after a $60 million capital raising in May.
While I am not suggesting Appen is a buy, it is worth watching and waiting, as I believe it is at or very near its bottom. We all know that it’s always darkest before the dawn and often I have seen good companies like Appen rise like a Phoenix out of the ashes.
That said, I caution everyone to be very patient and wait until it finds its bottom and starts to rise before entering. To jump too early could end in disaster.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online at www.wealthwithin.com.au