Our $40 target price is based on a sum-of-the-parts analysis and a regression analysis on 70/30 growth-margin mix based on Appian Sub Revenue Growth and FCF margin. We value Appian's subscription business at 4.6x CY26E EV/Sub Revenue, based on a regression analysis and 17% factor premium, and its services business at 2.0x CY26E EV/Services Revenue to derive our $40 target price.

We rate APPN High Risk. We see APPN shares being higher risk given the elevated growth rate, volatility of the stock, and a somewhat limited trading history. Risks of not reaching our target price include: Macro challenges leading to lower-than-expected bookings; increased competition in the market could cause Appian to lose share and see slow growth; recent sales investments drive a lower than expected return from recent sales leadership turnover; and Appian is not able to show leverage in the model as non-profitable companies remain out of favor.

Risks to the upside: Faster-than-expected automation and low-code adoption; more defined use cases streamlines the go-to-market; and partner strategy begins to inflect and broadens Appian’s distribution.