Profits, Profits, Profits....the reason that many stocks have fallen so far in the Russell 2K is because half of them do not make any MONEY!!! And sadly Avid falls into that category also. High interest rates coupled with weak demand from small Biotechs who are unable to secure funding, AND the lack of Avid to show profits or even positive cash flow, and you get this precipitous drop from $34 to $5.
So going forward there are 2 scenarios ahead of us and specifically 2 scenarios that can/will greatly affect our share price.
1)The December CC shows better than expected revenue and more importantly the beginning of profits and positive margins coupled with a positive outlook going forward.....result would be a strong rally(IMO). While this is a wonderful scenario, it may be a little too early to start showing the kind of results we are all looking for...perhaps the 1st or 2nd quarter of next year before things really begin to jell and the stock begins to move solidly higher?
2)The second scenario puts us in a more negative light, with the company continuing to lose money and perhaps even showing a small decline in our backlog due to cancellations. Nick did say that we would not be able to realize the benefits of our increased backlog in the coming fiscal year as not all of the orders would be able to be processed and completed. Of course this would put off our recovery into the latter half of next year(24) and would continue to add downward pressure on the share price and perhaps even kick us down into the mid $4's. I do not think this will be the case as it seems that $5 seems to be a pretty solid base that has formed.
Now while we all prefer scenario #1, all scenario #2 does is push us further down the road before the share price begins to come back...it is certainly not a death spiral.
I am firmly in the camp that we are way oversold and regardless of market conditions, there will be a strong recovery down the road....how long it will take is the question. The recovery could start with a positive December CC, or it could take another year, but IMO it will be coming, and so if you can afford to be patient and have some dry powder on the sidelines, buying in the $5 range will prove to be very prescient down the road IMO!
Finally I am not in the camp of interest rates being higher for longer....I believe inflation will fall faster than many believe and we may even bump into deflation down the road, and so I expect interest rates to be down at least 1 point by the end of next year and possibly much more(1.5 to 2)!
Of course all of the above opinion and $10(or 2 Avid shares) gets you a coffee at Starbucks! lol
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