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Appian: Still Frothy Amidst Competition Within Low-Code Space, And Rising Interest Rates

Mar. 05, 2021 1:26 PM ETAppian Corporation (APPN)2 Comments
Kayode Omotosho profile picture
Kayode Omotosho


  • Appian's valuation is tough to justify despite the attractiveness of its operating segments.
  • Topline growth guidance continues to be masked by the shift to a subscription business.
  • The forward guidance for profitability is also weak. Unprofitable growth stocks appear to be underperforming in 2021.
  • Given the competition within the low-code space and rising interest rates, I expect the multiple expansion motion to remain weak.

For Appian (NASDAQ:APPN), the case for buying the recent dip is weak. The modest growth outlook, declining profitability, weak momentum, and frothy valuation relative to peers make it tough to project a near-term rebound. I am projecting more mean revision in the near term. In the long term, Appian needs to keep investing in its platform to pull away from competitors as it remains tough to pick a winner in the low-code space.

Demand (Bullish)

Low Code-BPO-Digital Transformation-RPA

My bullish rating on Appian's growth outlook stems from the opportunities within the low-code space.

Appian provides a low code platform that employs less tech-savvy knowledge workers to drive work process efficiency. A platform that empowers less tech-savvy internet users is tough to bet against. This explains the impressive 5Y-avg. revenue growth of 23.5% (versus tech sector median of 5.7%). The growth factor has been a major contributor to the impressive returns over the past twelve months.

In recent quarters, growth has benefited from cloud subscriptions, offsetting the declines from the professional services segment.

By 2023, over 50% of medium to large enterprises will have adopted an LCAP as one of their strategic application platforms. - Gartner

In the last earnings slide, Appian separated and shared revenue growth from the cloud segment alongside overall revenue growth to highlight the future growth driver. Going forward, there are ample opportunities for the momentum in the cloud segment to continue. The forward revenue guidance calls for cloud subscription revenue growth of 30%-31% in FY'21. This strengthens my bullish stance despite the overall revenue guidance of 16%-17% for FY'21.

Business (Neutral)


Appian's positioning as a platform makes its growth options attractive.

Source: Appian

The last annual report highlighted the huge market opportunity, which extends beyond Low-code to RPA (robotic process automation), application PaaS, BPM (business process management), and case management. These represent

This article was written by

Kayode Omotosho profile picture
Kayode's strategy aligns only with businesses that have competitive moats, solid financials, good management, and minimal exposure to macro headwinds.-------------------------------------Coverage tilted towards tech stocks (IoT, Cybersecurity, Cloud, DevOps, Data management)

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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