MENU

Why the Audio Pixels Holdings Ltd (ASX:AKP) share price was crushed

One of the worst performers on the ASX on Wednesday was the Audio Pixels Holdings Ltd (ASX: AKP) share price.

The digital speaker development company’s shares finished the day down 17% to $14.32.

Why were Audio Pixels’ shares crushed?

Investors have been heading to the exits in their droves after Audio Pixels provided its fourth digital speaker development update in two months. And as you might have guessed from the share price reaction, it was yet another disappointing update.

According to the release, the company has received the wafers for the speaker that have undergone various optimisation techniques for the final steps of fabrication.

However, while significant improvements are evident, at the time of the announcement the “wafers received have yet to reach the qualitative levels that are required for the company to play complex music at the anticipated sound pressure levels.”

This news has overshadowed the apparent progress made by the wafers in validating most of the critical aspects of the device including the production of sequential tones and scans of frequencies throughout the audible range.

Despite this sizeable share price decline, which means its shares are now down 45% from their 52-week high, Audio Pixels still has a lofty market capitalisation of $385 million.

Should you buy the dip?

No. Audio Pixels was founded in 2006 and has been working on this speaker for years with little to show for it.

And while there is potentially a market for the product, until the technology has been proven I would stay well away from the company as it burns through its cash.

At the end of the March quarter the company had just under $4.4 million in cash and cash equivalents and an expected cash outflow of just over $1.4 million in the June quarter.

I suspect this means that the company will need to tap the markets for funds within the next three months or so. And given the growing scepticism over the company bringing its product to the market in the near future, it may have to raise money at a heavily discounted price. This could drag its shares even lower.

Instead of Audio Pixels I would urge investors to look at tech shares with proven technologies and growing such as Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

Alternatively, this medtech company could be a real star of the future.

The ASX small cap up 285% with no sign of stopping...

One Australian company has developed a state of the art device that's revolutionizing hospitals all over the world. Even better, this device is so profitable that the company rakes in 90% margins. That's a lot of cash. So no wonder the stock's up 285% since 2008 – with no signs of stopping...

To discover the name and code, simply click the link below. You'll discover our expert's #1 medical technology pick... and you can decide for yourself whether to get invested today.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.