Appen Bell Potter’s standout IT pick for reporting season
Bell Potter analyst, Chris Savage, has selected the highflying Appen as his key pick in the IT sector for the upcoming reporting season, and with many products from phones to cars moving towards voice controlled technologies the company is in a sweet spot.
Appen is a global language technology group with operations in Australia, the US and the Philippines. Its customers include the world’s leading technology enterprises and in the last six months it has strengthened its relationships with Microsoft and the world’s largest social media providers.
Appen also provides voice recognition products to the automotive sector, as well as government instrumentalities.
With the group’s technology having been adopted by the world’s leading search and social media companies, Savage recently highlighted the group’s leverage to the high-growth virtual assistant computing technology, noting that the big five technology companies in Apple, Microsoft, Facebook, Google and Amazon.com are all launching voice controlled devices.
As a backdrop, the group’s shares have increased approximately 300% from circa 80 cents 12 months ago to hit a recent all-time high of $3.25.
Prices are subject to fluctuation and investors should take a cautious approach to any investment decision in this stock and not base that decision solely on price movements.
There has been a slight retracement in recent weeks with the company’s shares closing at $3.14 on Friday.
Savage has just upgraded his 12 month price target from $3.10 to $3.40, implying a premium of nearly 10% to Friday’s close, although this is no guarantee.
However, this price target could receive a further boost after the company delivers its interim result which is scheduled for release on Friday, August 26.
Savage said, ‘While we already forecast a strong result for the six months to June 30, 2016, we also see potential for the company to beat our forecasts given we assume earnings will be below the second half of fiscal 2015 despite higher forecast revenue in the first half of 2016 ’.
While Savage is forecasting a slight fall in earnings in the six months to June 30, 2016 compared with the previous six months, the year-on-year metrics are compelling with the analyst forecasting net profit and earnings per share will be circa 60% ahead of the previous corresponding period.
While there is no assurance that Appen can meet Savage’s earnings expectations, or for that matter realise the share price target set, since the company listed on the ASX in January 2015 management has under promised and outperformed, and it would appear that the analyst is looking for a continuation of that trend when the interim result is delivered.