I've been searching online for financial information about Scale AI and found several websites providing estimated data. However, these sources claim that Appen generates $4.3 billion in revenue, which seems inaccurate to me. Based on publicly available information, Scale AI recently raised $1 billion at a valuation of $14 billion, with a year-over-year growth rate of 200%. Given that they are still seeking financing, it's likely they're operating at a loss, which is typical for high-growth tech companies. Assuming a price-to-sales ratio of 30 times, the estimated revenue for Scale AI would be around $460 million. In comparison, Appen's revenue was $530 million in 2019, and it was profitable with a market value of about $4 billion. Thus, Scale AI's valuation appears overvalued. However, as you mentioned, investors in the US tend to be more optimistic than those in Australia.
Personally, I don't foresee Scale AI acquiring Appen due to their significant business overlap. From a technological standpoint, having competitors in the market fosters innovation, benefiting both Scale AI and us.
Considering that Appen's market value is only $100 million compared to Scale AI's $14 billion, Appen seems significantly undervalued. By any metric, Appen's current valuation, with $200 million in revenue, a 30% gross margin, $36.4 million in cash on hand, and no debt, appears exceptionally low. The upcoming half-year report on 30th August is a critical time for Appen. If the company breaks even and maintains a market value of $100 million, it could attract acquisition interest from US companies.
I believe conservative investors will likely wait for the half-year report before entering the market, so significant stock price movements are not expected in the near term. Will it drop to the 30s as some suggest? I am unsure, but I am personally buying now as I believe it is worth taking the risk.
Nonetheless, these are just my personal thoughts and not advice for anyone. Please conduct your own research (DYOR).
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