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Bull of the Day: Avid Technology (AVID)

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Based in Burlington, MA, Avid Technology, Inc. (AVID - Free Report) develops, markets, sells and supports a wide range of software and systems for creating and manipulating digital media content. This content includes video or audio or graphics, in which the image, sound or picture is recorded and stored as digital values, as opposed to analog signals.

Avid’s systems are designed to improve the productivity of video and film editors by enabling them to edit moving pictures and sound in a faster, easier, and more cost-effective manner than traditional analog tape-based systems.

Q4 Earnings Show Strong Growth

Non-GAAP earnings of 29 cents per share easily beat the Zacks Consensus Estimate of 15 cents per share. GAAP earnings came in at 14 cents compared to a net loss of 2 cents per share in the year ago quarter.

Adjusted EBITDA was $21.3 million, while free cash flow was $17.7 million for the quarter.

Revenues in Q4 grew 5% to $112.7 million, and software revenue from subscriptions soared 77%. E-commerce sales increased a healthy 50% year-over-year.

Non-GAAP gross margin expanded by almost 5 full percentage points to 60.8%.

In the earnings release, CEO Jeff Rosica said that "Our return to revenue growth and the improvement in our key financial metrics, including Free Cash Flow and Adjusted EBITDA, demonstrate an improving business profile for [Avid]. Additionally, the management team is focused on continuing to build upon a scalable recurring revenue model as evidenced by our double-digit growth in subscriptions and e-commerce revenue.”

AVID is Gaining

Year-to-date, shares of AVID are up almost 76% compared to the S&P 500’s return of over 16%.

Along with strong Q4 results, Avid Technology reaffirmed its guidance for 2019.

For Q1, revenue is expected to fall in the range of $96 million to $104 million, with adjusted EBITDA between $7 million and $12 million. For fiscal 2019, we can expect revenues to be between $420 million to $430 million; adjusted EBITDA is forecasted in the range of $60 million to $65 million and free cash flow of $12 million to $17 million.

Estimates, thus, have been rising lately too, pushing the stock towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, the company’s earnings are expected to grow a whopping 148.15% year-over-year. One analyst has revised their estimate upwards in the past 60 days, and the Zacks Consensus Estimate sits at $0.67 cents for the year.

2020 looks pretty strong too, and earnings are expected to grow almost 39%; next year’s consensus estimate has moved six cents higher from $0.86 to $0.93, with one upward revision in the last 60 days.

Thanks to an expansive platform of digital platforms, tools, and solutions, the future is looking bright for Avid Technology. If you’re an investor looking for a tech stock to add to your portfolio, make sure to keep AVID on your shortlist.

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