Stock of the Week: Audinate

Provider of professional digital audio solutions, Audinate, is in a trading halt after announcing a $40 million capital raise to accelerate growth and pursue potential M&A. This consists of a $28 million insto placement and $12 million SPP.

We asked experts on The Call, Rudi Filapek-Vandyck from FNArena and Claude Walker from A Rich Life to look under the hood and kick the tyres of  AD8. Rudi says the cap raise is not entirely unexpected.

“This is a company that listed around [three years ago], it’s still a relatively small cap stock, it doesn’t make profits [but] it has a lot of promise.”

“My view would be yes, you can add this to your portfolio with the right risk adjustment – it’s a small-cap stock that’s not profitable… tough times mean the share price is unlikely to rally any time soon. But they having said that, they will have more money in the kitty so they might be looking at acquisitions. You never know what management will come up with… but I think investors will have to be patient.”

Claude likes the stock as almost all professional broadcast equipment “needs to have Audinate chips in it because that is the predominate system used to transfer audio signal over fibre optics”.

He suspects that in the next five to six years, AD8 will have such market saturation that it will be able to dial up its prices and have true pricing power.

“At that point I expect it will become a market darling… but I’m not super-enthused at the moment just because of the headwinds that we’ve got with the pandemic,” he says.