Caution is advised here. Until Avid becomes profitable again, book value doesn't mean a whole lot with such a long string of losses. I don't mean to throw cold water on anyone's hope for a recovery, but Avid's immediate problem is minimal sales growth momentum and zero profits. Even with other balance sheet positives, there's still too much risk here. Why not wait until it shows some real signs of recovery? There will be plenty of time to get back in.
However, as I have been saying for quite some time, their long-term problem is also a serious one, perhaps insurmountable--that is, their business plan to continue selling Mercedes with all the options in a rapidly changing market which is looking for reliable transportation at a lower cost, both of entry and of ownership (maintenance/upgrades). This strategic implication makes me want to avoid Avid stock even if it does return to profitability.
On November 2, I predicted Avid was going to drop to $8 or $9. Well, here it is. (You can read my post at techstocks.com ) There is still more downside to this stock as long as they keep announcing loss after loss. Also of note, the current quarter, just before the National Association of Broadcasters convention (April 5) is historically Avid's worst, since everyone holds off making purchases until they check out all the new toys at the show.
I'll be going to the show, and it's always a good time to size up Avid and its legions of competitors. I'll report my observations here.
D. Kuspa |
