It’s Time to put Appen (ASX: APX) on Your Watch List

Dale Gillham, Chief Analyst and Head Trainer of Wealth Within

By Dale Gillham |

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 (ASX: APX), which I have been doing. 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.

Appen’s share price will turn and rise strongly

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.

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 per cent as revenues were down 24 per cent 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 in too early could end in disaster.

What were the best and worst-performing sectors last week?

The best-performing sectors included Consumer Discretionary up 3.37 per cent followed by Materials up 3.21 per cent and Financials up 2.60 per cent. The worst-performing sectors included Consumer Staples up 0.43 per cent followed by Energy up 0.67 per cent and Utilities up 0.69 per cent

The best-performing stocks in the ASX top 100 included Mineral Resources up 10.02 per cent followed by Harvey Norman up 9.57 per cent and IGO up 6.79 per cent. The worst-performing stocks included Qantas down 6.73 per cent followed by Alumina down 4.91 per cent and the A2 Milk Company down 4.48 per cent.

What's next for the Australian stock market?

After falling for 22 trading days and nearly 5 per cent in price, last week the All Ordinaries Index had a big turnaround as it was up over 2 per cent on the previous week. In my previous report, I mentioned that the downward momentum in our market was around 50 per cent slower than the prior move up, which I indicated was positive given that the bears were not really committed to the down move. The story has now flipped as price rose over three days early last week and recovered what it took to fall over the previous seven days.

I also mentioned in my previous report that it was possible that this week could be a turning point and if it turned, it would rise consistently over the coming month or so. While I am not getting too excited just yet, the signs are good. That said, it’s best to have the mindset that the market could fall because as we have seen so many times in the past three years, just when we think the market is bullish it does the opposite. Therefore, I strongly recommend you have a stop loss on every stock you own.

For now good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.

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