This report is an updated version of the report published on 13 May 2025 at 11.46 AM AEST.

Appen Limited (ASX: APX)

APX specialises in providing data for the AI lifecycle, backed by over 28 years of expertise in data sourcing, annotation, and evaluation. With a diverse crowd of over 1 million skilled contractors fluent in more than 500 languages, the company enables organisations to develop innovative AI systems. Its comprehensive products and services instil confidence in leaders across technology, automotive, finance, retail, healthcare, and government sectors.

Recommendation Rationale – SELL at AUD 1.140

• Financial Highlights: Revenue declined by 14.0% YoY to USD 50.2mn in 1QFY25, compared to USD 58.4mn in 1QFY24, primarily due to the cyclical nature of the business. Gross margin decreased slightly by 40 basis points to 37.4% in 1QFY25 from 37.8% in 1QFY24.
• Trading Near the Resistance: APX stock has surpassed its R2 level recommended on 11 April 2025. Therefore, share price can face resistance at the current levels.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/EBITDA, Price/Cash flow) are higher than the Technology Sector.
• Market Risk: Changes in financial services regulations and legislation both domestically and internationally could further affect APX’s operations, introducing compliance challenges and potential cost implications.

APX’s Daily Price Chart

Valuation Methodology: EV/Sales Approach (FY December'25E) (Illustrative)

Stock might trade at a slight discount to its peers considering the decreased revenue in 1QFY25, gross profit margin declined in 1QFY25, and negative underlying EBITDA, etc. For conducting the valuation, the following peers have been considered: Integrated Research Ltd (ASX: IRI), Dicker Data Ltd (ASX: DDR) and Data#3 Ltd (ASX: DTL), have been considered.

Considering that the stock has surpassed its R2 level, macroeconomic uncertainty, current trading level, and risks associated, the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 1.140, at 11:00 AM, AEST, as of 13 May 2025.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 13 May 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided have been achieved and is subject to the factors discussed above.

Note 4: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.