This Beaten-Down Tech Stock Looks Like a Great Buy Right Now

Growth stocks in general have taken a beating recently, and Appian (APPN 3.76%) has been beaten down harder than most. However, in this Fool Live video clip, recorded on Jan. 24, Fool.com contributor Matt Frankel explains why he thinks the company looks like a great buy for patient long-term investors. 

Matt Frankel: This is Appian, ticker symbol A-P-P-N. Let me put this chart up here. This is a three-year chart of Appian. If you notice, most of the market peaked toward late 2021. Appian peaked in that January 2021 area at around $260. It was such a narrow spike, you can't even see the top on this chart. It looks like it goes to $240. It actually popped out at $260 one day. That was the meme-stock craze. Appian went very meme-stockish at the start of 2021. It was a rather heavily shorted stock. So, when you saw the stocks like AMC (AMC 3.96%) and GameStop (GME 6.16%) shoot to the moon, as they say, Appian kind of went with it.

It was very overvalued at that point. It has been on a steady decline, as you can see that, since. This is my worst performer of the four that I brought to the table, at least. They're down 80% from their high. But that's a big asterisk because, like I mentioned, they never really deserved to be at that $260 level. But, now they're starting to look very, very attractive. So Appian is a low-code app platform. They provide a low-code app platform, which essentially means, they try to give their clients the ability to produce developer-quality apps without having to hire in-house developers or send their employees to extensive training, or things like that. I think their guarantee is, they can produce a professional-quality app for $150,000 within six weeks for their clients. Which, when you think, if I'm not quoting that incorrectly...

Jon Quast: Is this across industries?

Frankel: Yeah, across industries. So when you think of how much some of the apps you use must have cost to develop, this is a relative bargain. Just to name a few of their clients. Bayer, the pharmaceutical giant, uses them for a lot of internal apps. Enterprise Rent-a-Car used them to build out their Enterprise ride-share app. Other customers -- T-Mobile (TMUS -0.06%) uses Appian. Major League Baseball is a client of theirs. Pretty much every government agency you can think of. The Army uses them for app development, the Department of Education -- I could go on and on and on.

But here's the key. This is a subscription business. They are not profitable yet. But their subscription revenue is growing both in terms of the number of customers on the platform and in terms of how much the existing customers are willing to spend. They have a 117% net revenue retention rate, which in basic terms, means their average customer who's been with them for a year is now spending 17% more than they were a year ago, the same customer.

They are expanding their relationships, expanding their customer portfolio. Appian's cloud subscription revenue has a 90% gross margin. It's not a profitable business yet, [but] 90% gross margins and 30% year-over-year growth like Appian is producing is a recipe for profitability down the road. They estimate their addressable market to be about $60 billion in terms of all the businesses they can help out with apps. Their current trailing 12-month revenue is about 0.5% of that. So they're just really scratching the surface. This is not a low-risk stock. There are alternatives for app development, there is competition. But the risk/reward is starting to look a whole heck of a lot better than it used to, and that's why I put it on here.