The Appen Ltd (ASX: APX) share price has continued its slide on Tuesday.
At the time of writing, the struggling artificial intelligence (AI) data services company’s shares are down 4.5% to $2.25.
This means the Appen share price is now down almost 70% over the last 12 months.
Why is the Appen share price falling?
Investors have been hitting the sell button again on Tuesday after brokers responded negatively to the company’s full-year results release from yesterday.
One of those brokers was Bell Potter, which has retained its hold rating and cut its price target by 25% to $2.25.
This is now in line with where the Appen share price trades following today’s decline.
What did the broker say?
Bell Potter notes that Appen’s full-year result fell short on the top line but was in line on the bottom line. While the latter was positive, this was then offset by “weak” operating cash flow and its soft guidance. In respect to its guidance, it said:
Appen did not provide any formal 2023 guidance. The company did, however, say there has been “a soft start to 2023” and 1H2023 EBITDA is expected to be materially lower than 1H2022. Appen also said it had identified annual cost savings of ~US$10m and the benefits will commence in 2H2023. The company has withdrawn its 2026 targets pending a full strategic review in May.
As a result of this, the broker is “still waiting for it to ‘appen” and has downgraded its earnings estimates materially for the coming years. Though, it even appears to believe that those could be challenging to achieve. The broker adds:
We have downgraded our underlying EBITDA forecasts in 2023 and 2024 by 53% and 48% which has been driven by an 11% reduction in our revenue forecasts in each period and also lower margin assumptions. We now forecast underlying EBITDA of US$14.7m in 2023 which is an improvement on the US$11.0m in 2022 but this assumes a large earnings skew to the second half.