Getting Bearish On Audinate (ASX: AD8)

Over the last 24 hours I’ve had a deeper think about how Audinate (ASX: AD8) is exposed to the pandemic.

I have concluded that actually there will be a long-lasting impact on the company. The reason for this is that the use case for Dante enabled products is strongest in large audio or audio visual installations. That includes places like cinemas, concert halls, and stadiums.

As you can imagine, the coronavirus is going to make life difficult for these kind of locations. I imagine they will have a drop in their own revenue, which will make them far less likely to be spending on their audio installations. These kind of decisions take a while to make, and these kind of businesses will take a while to bounce back from the virus. As a result, I expect to see an impact on Audinate’s revenue growth lasting 1 – 2 years. This slowing growth is likely to spook the market, given that the company is barely profitable.

Therefore, I have lowered my valuation of the stock, and have taken advantage of the bounce today to sell some Audinate stock. I sold some a bit below the current price of $5.97. As always, this is not advice and I could change my mind at any time.

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