Why Appian Stock Jumped 12.4% in August

What happened

Shares of Appian (NASDAQ: APPN) jumped 12.4% in August, according to data from S&P Global Market Intelligence. That performance brings the low-code software development platform provider's one-year return to 35.6% through Friday, Sept. 7.

For context, the S&P 500 returned 3.3% last month and has returned 18.8% over the past year.

So what

We can probably attribute at least some of Appian's robust August performance to the fact that more investors continue to discover it -- the company went public in May 2017 -- and to the release of encouraging second-quarter earnings on Aug. 2. That said, the stock is quite volatile, so investors shouldn't read too much into August's move.

In the second quarter, Appian's revenue jumped 39% year over year to $59.9 million, which included subscription revenue that grew 36% to $27 million. Net loss contracted to $11.0 million, or $0.18 per share, from $14.5 million, or $0.34 per share, in the year-ago quarter. Adjusted for one-time factors, net loss widened to $8.8 million, or $0.14 per share, from $4.4 million, or $0.08 per share. That was better than the adjusted loss of $0.17 per share that Wall Street was expecting.

Appian's lack of profitability is nothing for investors to worry about at this point. The company is spending aggressively on growth initiatives, which is common for technology companies new to the public markets.

While Appian's bottom-line result was better than Wall Street was expecting, the market's initial reaction wasn't positive: It sent shares tumbling more than 7% on the day after earnings were released, which we can probably attribute to the company's expectation that total revenue growth will slow in the third quarter. After digesting the earnings report, however, the market changed course: The stock began taking off two days after the release and gained 22.4% during the week after earnings were announced, more than making up for the initial decline.

Now what

For the third quarter, Appian guided for total revenue of $49.6 million to $49.8 million, which translates to growth of 11% to 12% year over year. Further, it expects subscription revenue to come in between $27.7 million and $27.9 million, which translates to growth of 34% to 35%. So while total revenue growth is expected to slow, subscription revenue growth is projected to remain strong. As fellow Fool Brian Feroldi said in his Appian earnings take, "[professional] service revenue is low margin and can be lumpy from quarter to quarter." The company expects an adjusted net loss per share of $0.19 to $0.17.

Thanks to Q2 results that surpassed management's expectations, the company raised its full-year 2018 outlook for both the top and bottom lines. It now expects:

  • Revenue of $213.8 million to $215.3 million, representing year-over-year growth of 21% to 22%.
  • An adjusted loss per share between $0.63 and $0.60, which compares with an adjusted loss per share of $0.30 in 2017.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Appian. The Motley Fool has a disclosure policy.