So chad and regalinvestor are suggesting that revenue is in decline for apx and may drop 30% next year.
let’s see how that prediction goes… for the current market leader, in a rapidly growing field, which is investing in new CHief product officers and teams of design engineers to expand and enhance their product offering. if you two seriously believe what you are writing, I strongly suggest you short appen at these levels. I’m going long at these levels, as I believe the balance of probabilities is more in my favour than yours, especially over a 3-5 year time horizon.
re the Rask post above comparing the recent lionbridge takeover metrics, I just had a chance to read and would say that I broadly agree with the message. I would note that they incorrectly used 81-88m aud as cy2021 guidance but the number is actually usd denominated so is more like 115m in aud. Hence my previous statement that appen is currently valued at around 9x ebitda, ie less than half of the lion bridge acquisition valuation.
appen is the global leader in terms of market share and operates on similar margins to lionbridge AI, so the above statement that customers will just shift to cheaper competitors to drive down price is not evidence based. I would make two points to discredit this bearish co spuracy theory:
1) There are no high quality trustworthy competitors that the faangs would work with, who charge lower margins; appen pricing is actually quite reasonable and competitive despite being the market leader;
2) The reduced spend on ad-related global search projects that has been a drag on the company is related to the big tech customers shifting focus to other projects in the face of regulatory pressures etc, but there is no evidence it is due to a loss of market share to competitors.
I agree that the competitive industry dynamics are key, as if appen was being eroded or disrupted by a superior competitor with a new better technology then sure that would be a problem. But such a theory misses the point of what appen does, they provide large training data sets and an on demand crowd to annotate datasets. This is not a ‘SaaS’ company or an old world finance company, so their risk of being ‘disrupted’ and having their market share eroded is actually small, because they have the moat that comes with (1) first mover advantage ; (2) market leader; (3) deeply established relationships with a long running partnership which builds deep trust in terms of confidentiality, managing sensitive data and sensitive projects securely and delivering reliably; (4) they continue to reinvest capital back into R&D and to undertake strategic m&a to maintain their position; (5) they closely monitor the technological and competitive landscape; (6) they are actually looking to move up the value chain of ML which will further consolidate their value proposition to customers and the value that they can extract for shareholders from the ML megatrend.
I’m happy with publicly disclosing that I have been picking up shares around 8.50 and happy to stand behind my thesis in this company with a 3-5 year view.
if those bears posting here are short, that’s totally fine by me, but you should at least have the guts to disclose it, and if you are right, I’ll happily admit so in due course, cut my losses and move on to the next bet. I only need to be right 6 out of 10 times and have generally averaged 7-8/10 over the past 6 years. I’ve had a few spectacular fails eg fnp, rfg, myx and 1st, all of which I cut my losses on, learnt important lessons from and moved on. I have certainly learnt more from thos losses than the easy wins.
but I have also learnt that patience is as important as stock picking when you invest. Often a thesis takes years to play out and the market over reacts to both the upside and downside along the way. I have seen that in stocks such as ore/ gxy/ pls in lithium, and even large Cap stocks which were oversold over recent years on cyclical/ temporary factors creating good accumulation opportunities such as sol, mqg, tls, all, sto, bhp, cgf, iag/qbe, etc etc.
so let’s meet back on this thread and see where appen is in 3 years, call it october 2024, if you havnt burnt all your capital day trading and shorting in the meantime and joined the squid game to get yourself out of your debts…
i also expect the share market is going to take a few sucker punches over the next 3 years as central banks and govts try to unwind the extreme liquidity of near zero interest rates and extreme money printing/ bond buying programs… so I’m not hugely optimistic for share market gains as a whole between now and 2024, but in relative terms I think Apx has a good chance of outperforming the asx and it’s weighting towards the banks and miners which each have headwinds (impending pressure on net interest margins due to rising funding costs and the expiry of the TFF for banks, and slowing construction demand for copper and iron ore plus increasing iron ore supply from Vale placing downward pressure on margins for the miners.
strap in, gonna be a wild ride as always!
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