Appian Stock: Strong Growth Supports Upcoming Breakout

Appian-Stock
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Appian Stock Is a Growing Enterprise Software Play With Great Prospects

I have presented many cloud technology stocks in the past, with the majority staging stellar gains for growth investors. One mid-cap cloud enterprise software stock with appealing upside price appreciation potential is Appian Corp (NASDAQ:APPN).

Trading around the midpoint of its 52-week range, APPN stock looks inviting, despite the stock already having advanced 54% over the past year and 7.35% year-to-date.

What makes Appian stock interesting is the company’s offering of a cloud-based “low-code” development software that helps clients easily build enterprise applications in-house.

Appian has about 280 customers, including 37 Fortune 500 companies and government agencies.

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While the enterprise application segment is competitive and dominated by many large players, Appian offers solutions recognized by industry players.

APPN stock debuted at $12.00 at its initial public offering (IPO) in May 2017. It traded as high as $43.26 in January 2018 prior to the subsequent selling.

The chart below shows Appian stock possibly setting up for an upward move.

Chart courtesy of StockCharts.com

On two previous occasions—in November 2017 and March 2018—the stock rallied after a wave down.

APPN stock appears to be in a similar situation after breaking down in July. It could see a rally back toward the $40.00 level, last encountered in January and June 2018.

The weekly chart above shows the stock holding at a support level.

My Bull Thesis for APPN Stock

What you will notice about Appian Corp is its steady revenue growth. Revenues grew in three straight years from $89.0 million in 2014 to $176.7 million in 2017.

Fiscal Year Revenue (Millions) Growth
2014 $89.0
2015 $111.2 25.0%
2016 $132.9 19.5%
2017 $176.7 13.0%

The revenue estimates have been pushing higher. Revenue is estimated to grow by 21.4% to $214.6 million in 2018, followed by growth of 15.1% to $247.0 million in 2019. (Source: “Appian Corporation (APPN),” Yahoo! Finance, last accessed August 24, 2018.)

One positive thing is that Appian has managed its cost of goods sold (COGS) after recording stronger gross income growth versus revenues in 2016 and 2017.

Fiscal Year Gross Income (Millions) Growth
2014 $52.2
2015 $62.7 20.2%
2016 $82.8 32.0%
2017 $112.1 35.4%

Appian has yet to be profitable on either a generally accepted accounting principles (GAAP) basis or an adjusted basis, but the company’s losses have narrowed.

Fiscal Year GAAP Diluted EPS
2014 -$2.49
2015 -$1.09
2016 -$2.13
2017 -$0.63

On an adjusted basis, Appian is estimated to narrow its loss to $0.46 and as low as $0.35 per diluted share by 2019.

Debt is not currently a problem as the company moves toward having positive free cash flow (FCF).

Fiscal Year Free Cash Flow (Millions)
2014 -$1.1
2015 -$2.7
2016 -$8.7
2017 -$9.6

Analyst Take

My bull thesis for Appian stock is based on what is expected to be strong growth in the enterprise software segment.

For the patient trader looking for an aggressive return, the company appears to have all the right tools to grow and drive the APPN stock price higher.