Appian Hit With Downgrade On 'Full' Valuation; Analyst Says Outlook Remains Strong

Appian Corporation APPN was downgraded by William Blair ahead of its fourth-quarter report on what the firm said is a full valuation and balanced risk-reward profile. 

The Analyst

Bhavan Suri of William Blair downgraded Appian Corp. from Outperform to Market Perform.

The Thesis

Appian appears to be fairly valued ahead of its Feb. 22 quarterly report, Suri said in a Friday note. (See the analyst's track record here.) 

“While we believe a premium is warranted, we see the risk-reward profile as balanced at current levels,” the analyst said. 

The analyst is predicting a fourth-quarter earnings beat, and said his conversations with customers, partners and consultants signal healthy deal activity in the current quarter and a favorable spending backdrop in 2018.

“Although Appian’s relatively small customer base, limited number of quarterly transactions and large deal sizes make quarter calls challenging, we believe the positive nature of our quarter-end fieldwork suggests the company should be able to surpass the Street’s $41.8-million revenue and $9.3-million operating loss estimates,” Suri said. 

William Blair also sees potential for first quarter and 2018 guidance to come in ahead of consensus, the analyst said. The firm's  downgrade is not due to a challenged outlook for Appian, but more so due to a rich valuation, Suri said. 

“While we are pleased with the strength of our checks and remind investors that our downgrade in no way reflects any weakness in demand or deterioration of the competitive environment, we believe this upside and further upside for 2018 is priced in at this level."

Price Action

Appian shares were down 1.77 percent at $35.51 at the close Friday. 

Related Links:

Appian's Multiple And Fundamentals Are Mismatched, Goldman Says In Downgrade

Appian Shares Downgraded On Valuation Concerns