Appian Shares Downgraded On Valuation Concerns

Appian Corp APPN shares have run up sharply since its May 2017 IPO, prompting an analyst to lower his opinion on the shares.

The Analyst

Morgan Stanley analyst Sanjit Singh downgraded the shares of Appian from Equal-weight to Underweight and increased the price target from $19 to $24.

The Thesis

Underlining the elevated valuation, Singh said in a Thursday note that Appian shares have added 130 percent since the IPO and 71 percent since a secondary offering. (See the analyst's track record here.) 

This compares to 15- and 5-percent advances, respectively, by the Nasdaq.

Despite the view that Appian has compelling technology and prospects for growing its share in the business process management and application platform markets, Morgan Stanley is wary of the elevated valuation, which Singh said poses elevated risks.

The risks stem from the valuation of Appian being well above best-in-class SaaS peers; expectations of difficult billing comparisons throughout 2018; and the vertical/customer concentration, which could result in earnings volatility if large deals are delayed, the analyst said. 

"We believe Appian has a promising future as it seeks to capitalize on the movement to low code software development, and we would look to get more constructive once Appian grows more fully into its high current valuation levels."

The Price Action

Shares of Appian are up over 119 percent over the past year.

Shares were up 5 percent at $36.30 at the time of publication mid-morning Thursday. 

Related Links:

Mizuho: After Industry Consolidation, Cloudera Emerges As A Buy

Oppenheimer Names Nutanix A 2018 Top Pick, Lays Out Bull Case