It would seem the Appen Ltd (ASX: APX) share price has bottomed out for the moment. Since reaching lows of around $10.65 last month, Appen’s shares have rallied 30% as the sentiment around the company and the broader tech sector has improved.
Over the past week, the broader All Technology (ASX: XTX) index has lifted 5.64% thanks to large-cap winners such as Xero Limited (ASX: XRO), Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU).
APX share price
What’s been going on recently?
Despite the recent lift in sentiment, Appen’s shares have continued to be volatile. Just last week, news that a director was selling down their holding sent shares down by over 6% on the day.
It was revealed CEO and managing director Mark Brayan sold around $1.4 million worth of shares recently, but still holds 482,032 direct shares and 294,033 in performance rights.
Is now a good time to buy shares?
A slowdown in performance last year suggested that many of Appen’s larger customers might not be as reliant on its services as they have been in the past.
Management have now tried to put some of these concerns to rest through a recent strategy turnaround that will now focus on building committed revenue from a more diversified customer base.
It will also consolidate its old relevance and speech business and will now have global services and new markets.
If management can execute this turnaround strategy successfully, the current share price seems fairly reasonable given the potential upside from here. Of course, at this stage, it’s only a plan that needs to be executed, so it could definitely require some faith in management.
A safer option could be to wait until Appen reports its half-year results, which could provide some detail into how the new business units are performing. While sentiment alone has been pushing up Appen’s shares recently, if the numbers were to confirm that conditions are truly improving, I’d expect Appen’s shares to re-rate from here.
Summary
Appen’s new strategy seems to be a step in the right direction that’s reversed some of the recent negative sentiment.
The broader thematic of artificial intelligence (AI) still seems to be growing. Management is estimating around $110 billion in AI spending by 2024, representing a 24% compound annual growth rate (CAGR).
For more reading on Appen, click here to read: The potential bear case for Appen (ASX: APX) shares – Are they dirt cheap?
