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Why Appian Stock Dropped 10% in June

By Keith Noonan – Jul 5, 2020 at 1:15PM

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The SaaS stock is still up 38% this year despite last month's dip.

What happened

Shares of Appian (APPN -3.26%) slumped 10% in June, according to data from S&P Global Market Intelligence. The software-as-a-service (SaaS) app development company's stock appears to have been impacted by last month's surge in coronavirus cases.

^SPX Chart

Image source: YCharts.

The double-digit slide for the stock last month followed a 24% increase for the company's valuation in May. Appian did release some new software offerings in June, but the new products weren't enough to lift the stock amid mounting indicators that the business would face a more challenging growth environment.

A cloud icon on top of the Earth.

Image source: Getty Images.

So what

Appian posted big gains in May thanks to first-quarter earnings results that came in ahead of expectations, but the company warned that it was facing significant headwinds stemming from the coronavirus pandemic. Management said it expected a significant impact on its business services segment and its ability to bring new customers on board amid a more challenging growth environment. June's dramatic increase in new confirmed coronavirus cases appears to have led investors to conclude that the headwinds could be worse than previously anticipated.

Nevertheless, the company continues to move ahead with new upgrades and product releases that could drive long-term growth. Appian published a press release on June 10 announcing the latest version of its automation software platform. The company's Low-code Automation Platform provides tools for using artificial intelligence, robotic process automation, and workflow management to develop business applications.

The company also issued a press release on June 15 announcing Appian CampusPass, a software suite designed to help educational institutions collect and process data about students and personnel on campus and manage challenges posed by the coronavirus. 

Now what

Appian stock has regained some ground early in July's trading, with shares up nearly 3% in the month so far.  

APPN Chart

Image source: YCharts.

When Appian reported first-quarter results in May, it laid out a target for second-quarter sales to come in between $60 million and $61 million -- representing a decline of 7.5% year over year at the midpoint of the target. Cloud subscription revenue for the period is expected to be between $28.4 million and $28.7 million, suggesting 25.5% year over year growth at the midpoint.

The company expects to post a non-GAAP (adjusted) loss per share between $0.23 and $0.26 per share, expanding from the $0.10 per share adjusted loss that it posted in the prior-year quarter. Economic slowdown stemming from the coronavirus is having a significant near-term impact on the business.

Appian is valued roughly $3.6 billion and trades at roughly 12.8 times this year's expected sales. 

Keith Noonan 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.

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