Avid Technology’s 4Q Profit Exceeds Estimates As Subscription Revenue Pops 55%

Avid Technology posted better-than-expected 4Q earnings, driven by strong subscription revenue growth. Meanwhile, net sales for the quarter missed analysts’ expectations. Shares of the technology company declined 2% in Tuesday’s extended trading session after closing nearly 7.6% higher on the day.

Avid Technology’s (AVID) 4Q adjusted earnings were $0.33 per share, up 17.9% year-over-year, and beat analysts’ expectations of $0.32. Net sales of $104.3 million missed the Street’s estimates of $105 million and decreased 10.3% from the year-ago period.

The company’s subscription revenue increased 54.9% year-over-year, while product revenue from perpetual software licenses and integrated solutions declined 28.7%. Additionally, the adjusted gross margin was 63.1%, down 10 basis points. (See Avid Technology stock analysis on TipRanks)

Avid Technology’s CFO Ken Gayron commented, “Our successful refinancing should reduce our annual interest costs by approximately $10 million, which, coupled with the expected improvement in our business, should allow us to drive further improvement in Free Cash Flow as we look forward to the remainder of 2021 and beyond.”

For 1Q, the company projects adjusted EPS to be in the range of $0.17 to $0.24 per share, versus analysts’ expectations of $0.20. Revenue is expected to land between $88 million and $94 million, versus the consensus estimate of $93.69 million.

Following the 4Q earnings release, Northland Securities analyst Nehal Chokshi increased the stock’s price target to $34 (66.5% upside potential) from $32 and maintained a Buy rating.

The analyst said, “Strong subscription drives impressive FCF results & guidance.”

Avid Technology shares have exploded 173.4% over the past year, while the stock still scores a Strong Buy consensus rating based on 3 Buys versus 1 Hold. That’s alongside an average analyst price target of $23.88, which implies 17% upside potential to current levels.

Additionally, Avid Technology scores an 8 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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