The Q2 results were in on Monday and were not disastrous - but the $10+ share price was a bubble based on wild hopes and dreams of revenues to come and these didn't happen. Revenue in the second quarter was essentially flat at $98.7 million, missing the consensus estimate of $101.3 million in sales. Avid's guidance called for $97 million to $105 million in Q2 sales. E-commerce revenue increased 19% and recurring revenue accounted for 58% of sales on a trailing-12-month basis. That all translated into adjusted earnings per share of $0.02 and not the $0.04 per share in adjusted profits that analysts were expecting.
And prior to the results for Q2, the share price closed at a nervous $9.68. Then came those results and it opened at $8.15 and by the end of play, the referee blew the whistle at $6.13.
So mildly disappointing results, continued losses and a sideways drift (i.e. normality!) has been resumed. Right now the share price is bouncing off a $6.50 low, so it looks as if all those who wanted to sell-off have done so and the rest are holding for now at least.
Avid has negative shareholder equity (liabilities exceed assets) and this is a more serious situation than just having a high debt level. Avid's debt level continues to increase and is not properly covered by operating cash flow (it is at 9%, i.e. less than a healthy 20% of total debt).
In short, Avid is making a loss, thereby endangering interest payments which are not properly covered by earnings. There is a covenant on those debts of about $300m that could, in theory, trigger a collapse or a take-over.
Anyway - people have been predicting the imminent demise of Avid for about ten years and the company is still here and still trading. The question I must ask is - is Avid a zombie company or a cockroach company? In other words, is it the walking dead or is it just unkillable?
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AVID stock is ready to go up?!?
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The Red Bladder wrote:Revenue in the second quarter was essentially flat at $98.7 million, missing the consensus estimate of $101.3 million in sales. Avid's guidance called for $97 million to $105 million in Q2 sales. E-commerce revenue increased 19% and recurring revenue accounted for 58% of sales on a trailing-12-month basis. That all translated into adjusted earnings per share of $0.02 and not the $0.04 per share in adjusted profits that analysts were expecting.
That just means the 'analysts' were wrong and AVID did what they said they would. The difference was a small amount, but since the EPS was so close to break even ($.02) it registered to some analysts as -50% earnings surprise which some trades use as an indicator.
I guess that means if the balance sheet was just slightly different and the EPS came in instead at say $.005 that the analysts would have called that a -400% earnings surprise?!? of course that makes no sense since it is a small difference in earnings.
Those EPS surprise numbers don't make any sense when the earnings are right near break even.
No matter. My stops were hit right away as soon as it started to fall so I locked in my profits. Then when the stock hit bottom I bought it up at $6 /share since I knew folks would figure out this trading indicator error. There is nothing different about the AVID picture than before.
Up about 8% today.
It will be fun to watch it go back up again before the next round of earnings.
This is why trading these kinds of stocks is fun because the 'analysts' don't know what they are doing. Their standard tools don't work and make for lots of opportunities like this.
See you next time!
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You are (IMO) definitely dealing with Avid stock in the right way - it's a swing trade and not a 'hold'.
Oh yes, there is! Debt is increasing steadily and exceeds market cap. Add to that $84m in piled-up physical assets and unsold inventory.DC-Choppah wrote: There is nothing different about the AVID picture than before.
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