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AVID stock is ready to go up?!?

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AVID stock is ready to go up?!?

Postby DC-Choppah » Wed May 01, 2019 2:21 am

Anybody investing in AVID?

They have turned a profit with earnings per share increasing since end of last year. They have caught they attention of the stock market investors because of their EPS increases.

Earnings report comes out early May. If they make their numbers for EPS (earnings per share) the stock price might jump up. If they miss, it might go down.

My question is : Is the increase in EPS (for the last 2 quarters) because people have bought into their subscription model, so that revenues will be predictable now, at a new level? Or, was that a one time blip for the last few quarters, and there are no new customers left?

Or said in another way, have they acquired all their new customers (who are willing to pay subscription) or are people just starting to sign on?

Or something else? How do you explain the increase in EPS?
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Re: AVID stock is ready to go up?!?

Postby zenguitar » Wed May 01, 2019 2:58 am

And.....

Cue Red Bladder.

Andy :beamup:
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Re: AVID stock is ready to go up?!?

Postby The Red Bladder » Wed May 01, 2019 6:32 pm

zenguitar wrote:And.....

Cue Red Bladder.

Andy :beamup:
And here I am! (Cue a 'woosh' noise!)

Earnings came out on the 14th of March, or thereabouts, and the share price went from $4-and-change to $7-and-change. This was followed by some retail buying and that pushed the price up to $8-and-change, after which there was a good deal of profit-taking, bringing the price down to $7+ and now this week we are at $8+.

The story of mismanagement at Avid has been a textbook example of how to not run a company. I hope you will forgive me for not mentioning names, but I know many of the players here and owners of the company.

Let us just say that the present share price reflects that fact that the current CEO is not a madman, a bully, or a blithering incompetent. He is in fact, normal.

One could be tempted to think that when the founders sold the company, the board placed only the most foolish and buffoon-like people in charge. Without naming names, one went on an M&A buying spree of companies who were going nowhere. He was able to do this because the share price shot up into the stratosphere of the mid-60s as Media Composer and ProTools became the industry standards and the associated hardware was selling well.

These companies were duds and the share price came back down to Planet Earth. Crazy was replaced by slothful stupidity and a CEO who sold off valuable assets at fire-sale prices and fired all the expensive leading engineers and tried to replace them with a motley collection of Ukrainian graduates.

Unsurprisingly, this didn't work!

Stupid was replaced by testosterone-fueled Captain Ego, who went on another buying binge to boost his self-confidence. $100m was wasted on buying two dead-beat companies pushing 90s technology! The money came from pawning the family silver, i.e. handing over all IP to a finance company in exchange for $200m. Avid today owns no patents, designs or copyrights.

In the middle of Regime Stupid, Avid was delisted by the NASDAQ for fiddling the books (not booking all costs in the right periods) and a young and funky investment dude, who happened to also be a keen guitar player and user of ProTools did a bit of background reading on Avid and thought -

"Holey Moley! This company has been abused, mismanaged and drained in the worst possible ways known to mankind and the world of business. And yet it survives! Just imagine what a great company it could be if someone normal were to run it!"

Regime Stupid had made such a mess of the company, that during the delisted period, a big chunk of shares was up for grabs at a rock-bottom price. Funky Dude jumped and became the second largest shareholder. Some people (i.e. me!) thought he had lost his mind! This was a failing company that had never ever been able to show any kind of year-on-year profit. What the hell was he thinking?

Even with the forced exit of mad Captain Ego and many shareholders selling up in total despair, he stuck the course and bit by bit, even added to his holding, making him the largest shareholder!

"I don't get it!" I told him. "The company has neither profits nor equity, but huge debts and crippling conventions on that debt! It must fail!"

A few weeks back, he sent me an 'I-told-you-so' email - stating "I told you so!"

BUT

Avid ain't out of the woods yet. The results were OK, but it now has to innovate to catch up with the likes of Black-Magic Design and Adobe. And it still has those debts and they ain't getting smaller!

Time will tell.
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Re: AVID stock is ready to go up?!?

Postby Agharta » Wed May 01, 2019 6:50 pm

Talking about letting a bunch of Amateur Tools run the company! :lol:
Thanks as I love a good bedtime story and now am ready for horlicks, lights out and dreams of expanding subscription numbers.
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Re: AVID stock is ready to go up?!?

Postby DC-Choppah » Thu May 02, 2019 12:58 am

Thanks for the insights.

Ok then:

- normal human in charge of the business
- a product that apparently the commercial production houses are willing to pay a subsricption for
- a predictable revenue stream going forward
- EPS accelerating beyond expectations
- $400M in yearly revenues


- Stock just went up 12% today. I just made some serious bank! Planning on making more.

I love music!!!
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Re: AVID stock is ready to go up?!?

Postby zenguitar » Thu May 02, 2019 1:03 am

But don't forget the debt burden long term. Chickens come home to roost.

Andy :beamup:
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Re: AVID stock is ready to go up?!?

Postby DC-Choppah » Thu May 02, 2019 1:47 am

Sure

But they have more assets than debt (265 vs 221 M$).

And the operating income, having grown recently, compared to the interest payment is 13.8 vs 8.9 M$).

So if the operating income grows to where the interest payment becomes a more reasonable fraction of the income, then they are looking like a company that plans to stay in business and pay of their debts while making money. Basically, something good to own a piece of. Not there yet. That is why one would have to buy now, before that happens.

The interesting part is that transition when then market figures out what the shares are worth. It could jump quite a bit as AVID crosses through the time when these debt ratios start looking normal instead of the raggedy, about-to-close-down, can't continue like this, kind of ratios previously.

It really looks like someone in charge just decided to really make it a viable business. Perhaps they love PT so much and have invested so much time using it that they don't want it to go away! ;)
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Re: AVID stock is ready to go up?!?

Postby CS70 » Thu May 02, 2019 7:03 pm

Good points. Gotta look into these shares :)
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Re: AVID stock is ready to go up?!?

Postby DC-Choppah » Thu May 02, 2019 10:18 pm

Stock went over $9 today which is higher than anytime since 2015. Volume is high. Lots of trading.

Definitely caught the traders interest. Shows up as a symbol with lots of volatility and ticks a bunch of traders algorithms because of EPS accelerating.

If AVID really has revenue coming in from subscriptions, then the earnings report Monday should be a continuation of what they have posted recently which means it will beat the EPS estimates hugely and the stock will jump. For whatever reason, the EPS estimators don't seem to understand why the EPS is going up. They try to just extrapolate and compare to peers. But the AVID situation may be kind of unique.

I don't know if most people trading this understand the subscription-based revenue issue or not or the learning curve issue of changing to another DAW. If not then that might be why they underestimate the EPS. I mean basically PT got way more expensive to use but that did not make the customers run away. Still chump change to a big production house, and now the revenue is stable.

$$$$
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Re: AVID stock is ready to go up?!?

Postby James Perrett » Thu May 02, 2019 11:01 pm

Avid are much more than just PT - they're really a video company.
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Re: AVID stock is ready to go up?!?

Postby The Red Bladder » Fri May 03, 2019 10:07 am

Before anyone gets any ideas about buying Avid at $9 a share, just remember that Funky Dude bought at about $3 or possibly even less. The object is to buy low and SELL high!

Avid is, as James rightly points out, a video company and in that field, it has a huge amount of catching up to do. It has lost the European market almost completely and relies on what I call 'Avid Island', i.e. Hollywood and those who are working closely with Hollywood around the World and some major broadcasters like Canal+ and RTL.

Avid still has about $220m in accumulated debts and owns no IP whatsoever. It still is not writing any meaningfully substantial black numbers in the right-hand margin and is heavily reliant on large studios and broadcasters for its revenues. Remember that large studios and broadcasters are getting smaller and farming out their day-to-day operations to small indie production houses who use other cheaper toys.

DaVinci-Resolve, Reaper, Premier, Cubase and others are steadily eating away at Avid's core customer base and the need for hardware that Avid likes to tie to its two main software packages is diminishing rapidly.

In short, the halcyon days of ProTools HD and Media Composer being mandated by law and by Disney are over and I can't see Avid's share price going back up to the dizzy heights of $60+. I could, of course, be wrong!

If you do buy shares, follow the lead of Funky Dude. If he sells, so should you. He talks to Captain Normal on a regular basis, usually over lunch and knows what Avid has in the pipeline.

He managed to clear out the board of place-men (and place-women) for owners who are now out of the game and he was able to get Captain Cock fired on the spot for 'inappropriate behaviour' - i.e. being a cock. Funky Dude may be a fan, but that ain't his money. He's supposed to make a profit for his investors by cashing-in now and again if he is to make those all-important boat payments.

If he continues to hold, it could mean that Captain Normal has some healthy innovations coming for the video market and has good news for owners as far as dividends are concerned. I can't remember Avid ever being able to pay proper dividends, so seeing some would make a very welcome change for them!
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Re: AVID stock is ready to go up?!?

Postby Guest » Fri May 03, 2019 10:43 am

At a tangent, I notice that small U.K. digital classical music publishers will only accept scores and parts in Sibelius (owned by Avid). Fortunately I have no intention of submitting any works to them but Finale (which I use) is generally considered more versatile and Dorico is up and coming.
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Re: AVID stock is ready to go up?!?

Postby The Red Bladder » Fri May 03, 2019 11:15 am

Yes, either Captain Cock or Captain Stupid - I forget which idiot it was, I think Cock, but I'm not sure - decided it was the right thing to do, to fire the entire 20+ staff at Sibelius in London, thereby having to give them all a substantial redundancy payment and replace them with a handful of Canadian IT graduates who then just fiddled with the functions to make it look as if it is being upgraded.

Captain Sibelius and his team had already been 'approached' by Yamaha/Steinberg so a phone call was made and a funding package was agreed upon, allowing 12 of the top 'Sibeliistas' to create a new and superior package. This exchange of body-fluids lead to the birth of Dorico.
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Re: AVID stock is ready to go up?!?

Postby Guest » Fri May 03, 2019 11:24 am

It's interesting that the same as there is a cult that says Pro Tools is the industry standard, there is also a cult that says Sibelius is the industry standard. Admittedly Sibelius can have an attractive appearance immediately, but that is down to the font and layout which can be achieved in the other two. Many suggest that Dorico is going to replace Sibelius, particularly among new users.

The Sibelius strength apparently was that within half an hour of using it you could produce a lead sheet. However as music engraving is complicated and takes time other things are more important. If all you want to do is lead sheets I gather there are much cheaper options.
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Re: AVID stock is ready to go up?!?

Postby DC-Choppah » Sat May 04, 2019 2:55 am

Up about 6% today
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Re: AVID stock is ready to go up?!?

Postby DC-Choppah » Sat May 04, 2019 3:05 am

The Red Bladder wrote:Avid still has about $220m in accumulated debts and owns no IP whatsoever.

I am not sure if IP is an issue here.

I appreciate your insights that the company sold their IP and copyrights and now have none.

For most customers we don't care.

Most things are already over engineered now anyway.

We just don't want to relearn stuff that we already know. Time is money.
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Re: AVID stock is ready to go up?!?

Postby DC-Choppah » Tue May 07, 2019 2:00 am

Earnings report is $.11/share which is better than the $.07/share that the analysts said (on average). Some analysts thought it would tank while others extrapolated to higher EPS. In reality it went in between, but higher than the average.

Stock is up 8.5% in after hours trading.


Man, I need a place to park my new boat.

I did tell you guys.
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Re: AVID stock is ready to go up?!?

Postby Sam Inglis » Tue May 07, 2019 7:49 am

I was surprised recently to be told that Pro Tools development is handled by a single person at Avid. Apparently he left for a while during the various management crises, and it's only since he returned that they've actually got development back on a sensible path.
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Re: AVID stock is ready to go up?!?

Postby DC-Choppah » Wed May 08, 2019 3:32 am

Peaked at $10.42 this morning, then there was a whole market sell-off that brought it back down (along with everything else).

Hope you got out early today and made some good money.


I think I might use some of the money to buy myself the perpetual PT license. Feels like I got it for free!
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Re: AVID stock is ready to go up?!?

Postby The Red Bladder » Thu May 09, 2019 9:21 am

If you bought Avid before the Q4 results you should have paid about $5 or less and right now there is a great deal of profit-taking, so it is bouncing off the ceiling at about $8, so a sell order at $9 or $8.50 (to be on the safe side) would be a good idea if you are engaged in swing-trading.

Funky Dude did, however, sell about $8m worth of shares in mid-April at c.a. $8.50, but is holding the rest, so either there is good news coming down the pipe - or he is waiting for another profit-taking peak, giving him the opportunity to shuffle gracefully (and profitably) out of the door - who knows!

My 30 cents worth is that there is still a great deal of misplaced enthusiasm in some smaller investors who are piling in at $9+. As I stated before, the idea is to buy low and not high!
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