The Australian Securities Exchange (ASX) hosts quite a few stocks that are global leaders, and here are two of them – both operate in specialist global technology fields, where they are very highly regarded. But both have had to rebuild after flying too high and too close to the sun. Both require faith from investors, because they currently do not make a profit. But for investors who want to see demonstrated success in global markets, and a market ‘story’ that now appears to offer highly attractive buying, this pair fits the bill.
- Appen (APX, $1.03)
Market capitalisation: $272 million
12-month total return: 108.1%
Three-year total return: –48.9% a year
Estimated FY26 dividend yield: no dividend expected
Estimated FY26 price/earnings (P/E) ratio: n/a, loss-maker
Analysts’ consensus price target: $2.17 (Stock Doctor, four analysts), $2.50 (FN Arena, one analyst)
Technology stock Appen, which a global leader in the development of high-quality datasets for machine learning and artificial intelligence (AI), flew to ‘market darling’ status through the 2010s, turning its January 2015 listing price of 50 cents a share into a peak share price of $32.95 in August 2020 – a 65-bagger for the initial public offering (IPO) subscribers.
But Appen fell from grace – heavily – as its over-reliance on a few large clients and intense competition turned very sour for it. Appen was removed from the S&P/ASX 200 index in 2022 and traded as low as 79 cents in May this year. In hindsight, that would have been a great time to buy, because Appen has mounted an impressive turnaround.
Appen’s primary offering, providing the datasets that its clients use to improve their use of AI, and for generating high-quality training data, is highly sought-after in the age of generative AI, artificial intelligence systems that can quickly create human-like text, images and content.
Appen is a third-party dataset provider for AI and machine learning algorithms, using crowd-sourcing methods to generate the data that goes into the machine learning models of many of the biggest tech companies in the world, used in everything from search engines to voice assistants and image recognition technology.
Appen provides data ‘labelling,’ which is the process of identifying raw data (images, text files, speech files, videos, alpha-numeric data etc.) and adding one or more meaningful and informative labels to provide context, so that a machine learning model can learn from it. The Australian firm’s edge in this market is that it has a ‘crowd’ of more than one million contributors spanning more than 200 countries, and speaking more than 500 languages and dialects, all of whom contribute to evaluating, contextualising and annotating data. This diversity offers Appen’s customers advanced and curated data labelling capable of incorporating highly specific cultural, language and social nuances. With the ability to support large language model (LLM) capabilities putting it
at the forefront of generative AI, Appen is riding the wave: 80% of the world’s leading LLM model builders are its customers (Appen is currently working with 26 LLM model builders around the world.)
Appen works with some of the biggest users of AI in the world such as Amazon, Microsoft, LinkedIn, Salesforce, Adobe, Oracle, Boeing and Airbus. Seven out of the ten largest global “big tech” companies by market capitalisation are clients, and its top five clients have been with it for an average of more than nine years.
Appen’s revenue slipped by 14% to $234.3 million in 2024 (the company uses the calendar year as its financial year), mainly due to the termination of its contract with Google, but the net loss improved by $98 million, to a net loss of $20 million. China revenue surged by 71% – Appen is the largest AI data company in China, with more than twice the revenue of its nearest competitor – and global product revenue more than tripled.
Appen is not profitable and won’t be until at least 2027. In May, Appen upgraded its 2025 revenue guidance, projecting growth up to 11%, potentially reaching between $235 million and $260 million. The company has identified China as a key growth driver. Analysts think that Appen’s share price recovery has quite some way to run.
- Audinate (AD8, $7.18)
Market capitalisation: $598 million
12-month total return: –56.4%
Three-year total return: 3.4% a year
Estimated FY26 dividend yield: no dividend expected
Estimated FY26 price/earnings (P/E) ratio: n/a, loss-maker
Analysts’ consensus price target: $10.56 (Stock Doctor, eight analysts), $9.41 (FN Arena, four analysts)
Australian company Audinate has an outstanding technology called Dante, an audio-over-internet protocol (IP) networking solution, under which it has patented the way that audio-visual (AV) systems are connected and transport media over standard IT networks. Dante is an AV-over-IP (internet protocol) networking solution that is used extensively in the professional live sound, commercial installation, broadcast, public address, and recording industries: Dante replaces traditional analogue cables by transmitting perfectly synchronised audio and video signals across large distances, to multiple locations at once, using nothing more than an ethernet cable.
Dante simplifies complex AV systems without compromising sound or image quality, making them far easier to manage: the technology powers products available from hundreds of leading AV manufacturers around the world. It has become the de facto standard in audio networking. The model is that Audinate’s hardware is included within the products manufactured by the major OEMs (original equipment manufacturers) such as Yamaha, Sony and Bose; and once this equipment is Dante-enabled, those end-users would typically then use Audinate’s software to manage networking. This generates a strong “network effect” – now that Dante has been adopted as the de facto industry standard, OEMs effectively have to offer products that work with Dante, because their products will be more widely adopted if they are inter-operable with most other pieces of digital AV equipment in the market. The more OEMs Audinate gets into, the stronger that network effect becomes.
Audinate was initially hurt by the COVID-19 pandemic, which curtailed live events – and more than halved the share price, to below $4 – but it recovered as it grew revenue growth in four consecutive financial years. In October, however, the company downgraded its revenue targets for the 2025 financial year and told investors demand from customers had been weaker than expected, Audinate blamed the weak performance on a challenging operating environment driven by shorter order lead times, increased inventory across the industry and softer-than-expected demand from end users.
The company warned that 2025 would be a “transitional” year, as its OEM customers continue to work through their backlog, and we wait for end-user demand to pick up the slack and re-accelerate future orders. But with more than six million Dante devices in the field – about 12 times the adoption of its nearest competitor – Audinate said growth would continue to be driven by the increasing adoption of Dante technology across an increasingly wider range of audio and video products.
The digital audio networking industry is still an inventory overhang, but there should be upside for earnings forecasts for Audinate for FY26 and beyond. The company is not profitable, as it reinvests in growth, but has a strong balance sheet and plenty of cash – it had $111.3 million in cash at the half-year, providing financial strength and flexibility.
