What happened
Shares of Appian (APPN 0.19%) jumped last month as the low-code software specialist benefited from changing market sentiment as investors responded to cooling inflation and expectations that the Federal Reserve would slow its interest rate hikes.
Appian also announced a new product release and continued to spread the word about its $2 billion legal victory over rival Pegasystems, which is set to go to appeals court.
According to data from S&P Global Market Intelligence, the stock finished last month up 27%.
As you can see from the chart below, Appian gained as the Nasdaq also inflected in January.
So what
Like most of the tech sector, especially the part made up of unprofitable tech stocks, Appian stock got crushed in 2022, falling 50%. With interest rates rising throughout the year, investors rotated out of unprofitable growth stocks like Appian in favor of more defensive options like dividend-paying stocks and bonds.
So far, that pattern seems to be reversing as the economy has been resilient, inflation is coming down, and the Federal Reserve is beginning to taper its interest rate hikes, which all are positive signs for the low-code software stock.
At the end of January, the company released a new product called Connected Underwriting, which helps insurers speed up the underwriting process and improve customer service. One of Appian's biggest customer verticals is insurance, so the new product should help it continue to penetrate that industry and grow its business.
The company also stepped up its efforts to inform the public about its $2 billion award against Pegasystems for violation of the Virginia Computer Crimes Act. It made a filing with the Securities and Exchange Commission (SEC), sharing an email that CEO Matt Calkins had shared with employees that encourages them to share Appian's side of the story. Appian also made a website explaining the case to better inform the public, investors, and customers.
Now what
Appian is set to report fourth-quarter earnings, and expectations are modest after the company reported slowing growth in its third quarter and called for further deceleration in Q4.
Currently, the analyst consensus calls for revenue growth of 17% to $123 million and expects an adjusted per-share loss of $0.40, compared to $0.16 in the quarter a year ago. Calkins had said on the Q3 earnings call that losses expanded as the company filled its open positions faster than expected. He also said it would cut its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss margin in half by the second half of 2023.
The low analyst expectations could give Appian an easy bar to jump over, but they also show that 2023 is likely to be a challenging year for Appian and much of the software sector.
