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Appen falls 40% as Google ends contract, analysts remain ‘fundamentally bearish’

Published 01/22/2024, 06:49 AM
Updated 01/22/2024, 06:51 AM
© Reuters Appen falls 40% as Google ends contract, analyst remains ‘fundamentally bearish’
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Shares of Appen (APX) plummeted more than 40% in the Australian trading session on Monday after Alphabet's (NASDAQ:GOOGL) Google opted to terminate its inbound services contract, marking the conclusion of a deal that contributed approximately 30% of Appen's projected 2023 revenue.

The decision, revealed as part of Google's strategic review, caught Appen by surprise, leading to the cessation of all work on projects covered by the contract by March 19.

Appen expressed disappointment over the unexpected decision, emphasizing that the company had no prior knowledge of the termination, with $82.8 million out of its annual revenue of $273.0 million attributed to this Google contract.

In the wake of the news, Morgan Stanley analysts reiterated its Underweight rating on APX, citing concerns such as Appen’s “less valuable” technology to traditional customers and intensifying competition, among other things.

“Today we received an important confirmation of this thesis, from one long term and major APX customer - Google,” analysts wrote in the note.

As a result, the analysts anticipate the negative impact “on the economics of the remainder of the APX business to be meaningful.”

“We remain fundamentally bearish,” the team concluded.

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