Appian (APPN) Slammed as Barclays Calls 'Most Expensive' in Downgrade Report

Appian Corp. (NASDAQ: APPN) shares are down nearly 7% on the session, driven lower by a Barclays downgrade to Underweight (from Equalweight), despite a price target increase to $26 (from $24).

Analyst Raimo Lenschow calls APPN shares "the most expensive" in his universe, noting a special situation created by a large active investor, Abdiel Capital, engaging in aggressive purchasing of shares with a small float, triggered price appreciation "not supported by this valuation level." Prior to today's trading, APPN shares have rallied 94% since December 15th 2017, massively outperforming the broad market, with the S&P 500 up 3% over the same time period. According to the Barclays analyst, those shares gains were mostly fueled by Abdiel Capital Advisors LP, a value investment firm based in New York, that now owns 46% of the public float in APPN.

Lenschow remains positive on the 'greenfield market opportunity for low code' and 'healthy execution' from Appian management, thus explaining the price target raise to $26. However, the analyst sees the rich valuation level relative to growth expectations and revenue mix, as a result of the special situation in the shares created by Abdiel Capital, instead of the underlying fundamentals.

Simply put, the current valuation levels are not "justified" with APPN trading at 13x calendar year 2018 sales and 11x calendar 2019 sales. The concentrated stake presents downside risk for investors, should Abdiel Capital decide to sell-off a portion of the recently accumulated position.

The new price target of $26 represents 52.6% downside from Friday's close.

StreetInsider Premium first published a variation of this article at 4:13AM ET. Try StreetInsider Premium for two weeks free here.

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