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Technology Stocks : Avid Technology
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To: David Kuspa who wrote (196)4/22/1997 7:00:00 AM
From: Justa Werkenstiff   of 777
 
I thought I would update my feelings on AVID to those who may be interested. I think AVID has gotten ahead of itself and so I sold my entire position and banked the profits.

Management's goal for 1997 is threefold: (1) bring gross margins to 50% by the end of the year; (2) bring operating expenses as a percentage of revenues to the low 40s%; and (3) increase revenues between 10 and 20%. Based upon the first two goals being reached incrementally by the end of the year and a 15% overall increase in revenues and a 35% tax rate, that currently puts earnings at .41 per share at a best case scenario. At a share price of $15.5, this puts AVID shares at nearly 38 times forward earnings. In this market, there are just too many other less expensive and more predictable companies.

This is not to say that AVID's stock price could not go higher. I believe that there is a good possibility that AVID will beat consensus earnings estimates of -.08 for this quarter. This could well propel AVID higher. You got the recipe of strong insider buying, analyst upgrades, Intel backing, momentum and/or chart buying, the post NAB bounce and the potential for earnings estimates to be taken out this one quarter. If all this happens, I might consider going short. Right now, the reward for being right on the short side is too little given the risks, the strong base for this stock and given the other opportunities in the market.
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