Here’s why the Audinate (ASX:AD8) share price is up 25% in a month

The audio technology company’s shares have had a stellar month.

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Audinate Group Ltd (ASX: AD8) shares have jumped almost 25% higher over the last month (to $10.03, as at the time of writing). This recent increase puts the performance of the Audinate share price firmly in the green so far this year, up a little over 20% in total.

And, just to cap it all off, Audinate shares even set a new all-time high price of $10.29 last week.

Let’s take a look at what the ASX audio technology company has been up to lately.

Company background

Audinate develops technology to simplify complex digital audio connection networks. The company is focused on the professional audiovisual (AV) industry, providing digital sound technology to support radio stations, recording studios, and even professional sports stadiums.

Audinate’s flagship product is called Dante. It is designed to replace all the various connections used by legacy audio networks – like all the heavy cords used to connect microphones, amplifiers and speakers – with a computer network that sends out AV data over lightweight ethernet cables.

By digitising traditionally analogue audio connections, Dante creates a simple to set up and easily scalable AV solution for industry professionals.

What has got the Audinate share price racing higher?

The Audinate share price was among those hardest hit by COVID-19 lockdowns last year. With the live music industry effectively on indefinite hiatus and many international sports leagues either cancelled or postponed, it was assumed that demand for Dante would dry up. The Audinate share price went into freefall, tumbling as low as $3.13 by March 2020.

Then, as expected, in April 2020 Audinate withdraw its FY20 growth commentary in response to the escalating COVID-19 crisis. The company stated that “government decisions have the potential to delay projects and reduce the near-term demand for Audinate’s technology.”

In the end, FY20 revenue increased by 7% year on year, to $30.3 million, although the uplift was almost entirely due to favourable movements in foreign exchange rates. Audinate invoices its customers in US dollars, and in USD-terms, revenues only increased marginally year on year, from US$20.3 million to US$20.4 million. The Audinate share price fell by around 7% on the day of the update.

However, things slowly began turning around from there. In a trading update provided last October, Audinate stated that sales momentum had been recovering, with revenues increasing each month throughout the first quarter of FY21.

Then, in its first-half FY21 results, Audinate reported that revenues had returned to their pre-COVID levels. The company brought in US$11.1 million in revenues over the first half of FY21, the exact same amount it generated in the first half of FY20, and a 19% increase over the US$9.3 million it reported for the second half of FY20.

But the real cherry on top of Audinate’s recovery came just last week when the company reported that unaudited revenues for FY21 had come in at US$25 million, a year-on-year increase of 23%. Commenting on the update, Audinate co-founder and CEO Aidan Williams said Audinate was “well placed to return to US$ revenue growth in the historical range and consistent with current market expectations for FY22.”

Investors responded positively to the company’s recovery story, with the Audinate share price climbing almost 8% higher on the day of the announcement. With its fortunes so closely tied to a post-COVID economic and social recovery, Audinate will be a fascinating company to watch over the next few months.

Should you invest $1,000 in Audinate right now?

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Motley Fool contributor Rhys Brock owns shares of AUDINATEGL FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AUDINATEGL FPO. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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