Please ensure Javascript is enabled for purposes of website accessibility

Why Appian Stock Dropped 20% in September

By Beth McKenna - Oct 7, 2019 at 8:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Last month was just a minor speed bump for shares of the fast-growing software-as-a-service company.

What happened

Shares of Appian (APPN -0.21%), a low-code software development platform provider, declined 20.1% in September, according to data from S&P Global Market Intelligence. Nonetheless, in 2019, the software-as-a-service (SaaS) company's stock is still up a whopping 83.2% through Oct. 4. 

For context, the S&P 500 returned 1.9% last month and 19.6% so far this year.

An open laptop showing computer language on its screen, with yellow Post-It notes and a purple pencil sitting on the keyboard.

Image source: Getty Images.

So what

There doesn't seem to be any company-specific news behind Appian stock's September drop. It was one of many highly valued growth stocks -- particularly of companies that aren't profitable -- in the tech sector that took sizable hits last month. We can probably attribute this dynamic to some investors rotating out of these types of stocks and into what they consider safer due to concerns about an impending recession or at least a slowdown in economic growth.

It's also likely that profit-taking was at play. After all, Appian stock ran up 51.4% in August, so some short-term traders surely took their fast profits. 

Why the huge run-up in August? On Aug. 8, Appian released second-quarter results that easily beat Wall Street's top- and bottom-line estimates and delighted investors. Revenue grew 12% year over year to $66.9 million, driven by a 41% jump in the higher-margin subscription revenue category. Adjusted net loss narrowed to $6.6 million, or $0.10 per share, from $8.8 million, or $0.14 per share, in the year-ago period.  

Now what

As I wrote last month regarding guidance:

For the third quarter, Appian guided for total revenue of $65 million to $65.5 million, representing growth of 18% to 19% year over year. Furthermore, it expects subscription revenue to come in between $38.8 million and $39 million, or grow about 32% to 33%. The company forecasts an adjusted net loss per share of $0.16 to $0.15. 

Management also raised its full-year 2019 revenue projection and slightly lowered its bottom-line outlook. It now expects:

  • Revenue of $260.5 million to $262.5 million, or growth of 15% to 16% year over year. Its previous guidance was for revenue between $255 million and $258 million. 
  • An adjusted loss per share between $0.55 and $0.51, which compares with an adjusted loss per share of $0.54 in 2018. Its previous outlook was for an adjusted loss per share of $0.55 to $0.50.

Appian hasn't yet announced a date for the release of its Q3 results, but investors can probably expect it to be in early November. 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Appian. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Appian Stock Quote
Appian
APPN
$52.26 (-0.21%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
395%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.