Why Avid Technology Stock Crashed Today

What happened

Shares of Avid Technology (NASDAQ: AVID) were trading down by 20.6% at 2:36 p.m. ET on Thursday after the company delivered first-quarter results that were at the lower end of management’s previous guidance. At that point in the session, the Nasdaq was down by 5.4%, largely on macro-economic concerns.

So what

Overall, Avid Technology continues to see growing demand for its software and tools used for content creation in the music, film, and TV broadcasting industries. In Q1, its revenue grew 7% year over year to $100.6 million, which was in line with analysts’ estimates. That was driven by strong growth in subscription revenue of 32% year over year.

However, shortages of key components for its audio solutions contributed to revenue being lighter than management had expected.

“While we continue to see strong customer demand and business activity for our solutions, we have seen a tightening of supply for several components for our audio integrated solutions at the end of the first quarter that impacted our ability to meet customer orders, resulting in first quarter revenue at the lower end of our guidance,” CEO Jeff Rosica said.

He further cautioned that supply chain obstacles could cause further unevenness in the company’s near-term results.

Image source: Getty Images.

Now what

The market is bracing for a possible recession, given the combination of high inflation and the tactics that central banks are implementing to counter it. As a result, the share prices of companies that are reporting weaker growth this earnings season are getting slammed.

Management expects Avid Technology’s second-quarter revenue to land in the $92 million to $104 million range. Full-year guidance calls for revenue in the $430 million to $450 million range, which would represent growth of 7% at the midpoint.

Meanwhile, the company continues to repurchase shares — 10 million worth in Q1 — reflecting management’s confidence in future growth. Analysts currently expect Avid Technology to grow earnings at an annualized rate of 15% over the next five years.

10 stocks we like better than Avid Technology
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Avid Technology wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of April 7, 2022

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.