Why the Audinate (ASX:AD8) share price is rated as a buy

UBS currently rates Audinate shares as a buy.

| More on:
Woman with speaker

Image source: Getty Images

The Audinate Group Ltd (ASX: AD8) share price is currently rated as a buy by the broker UBS.

What does Audinate do?

This is an ASX tech share that provides an offering called Dante, which is audio over IP networking. The company claims it’s a worldwide leader and is used extensively in the professional live sound, commercial installation, broadcast, public address and recording industries.

It replaces traditional analogue cables by transmitting synchronised audio signals across large distances to multiple locations at once, using just an ethernet cable.

Why does UBS rate the Audinate share price as a buy?

The broker rates Audinate as a buy with a price target of $11.75. That suggests that Audinate shares could rise by almost 20% over the next 12 months if analysts at UBS are right.

An important part of the potential growth story for UBS is the fact that Audinate is now offering video as well, to complement the audio service.

To enable the video offering, it recruited a team in Cambridge (in the UK) to accelerate its product rollout. Six new OEM (original equipment manufacturer) Date video products have been launched. New software video products are expected in FY22.

One of the company’s objectives for FY21 was to expand its training offerings to include Dante video and a wider range of languages. The ASX share said that 12,000 people have been trained on Dante video. There have been 59 non-English webinars and more than 13,000 non-English speaking professionals trained. There has also been a 47% increase in non-English speakers in the ‘contact’ database.

Audinate also revealed that it’s exploring acquisition opportunities for the potential to supplement the Cambridge team to increase and improve the video business.

The combined Dante video and audio combined offering has seen a “good number” of design wins, with a growing pipeline, but COVID has been a headwind.

FY21 result profit numbers

The Audinate share price is currently up around 15% since first giving investors an insight into its expected FY21 growth numbers in July.

In the FY21 report, Audinate said that it grew revenue by 22.5% to US$25 million, with gross profit growing 23.1% to US$19.2 million.

Looking at operating profit, the earnings before interest, tax, depreciation and amortisation (EBITDA) climbed by 50.1% to A$3 million. The net loss after tax improved by 17% to a loss of A$3.4 million. Operating cashflow was a positive A$6.7 million, up from A$4.8 million.

Outlook for growth and the Audinate share price

Investors often like to consider the upcoming year when thinking about a valuation for Audinate shares (or any business).

In FY22 the ASX share is expecting to drive further design wins for Dante video and next generation software products, launch more products, improve non-English speaking adoption, increase cyber protection and implement business scalability initiatives.

The Audinate co-founder and CEO Aidan Williams said:

The strong demand for our technology as the AV industry recovers from COVID is particularly encouraging for Audinate’s longer-term outlook. In the short-term, we expect continued supply chain uncertainty throughout the remainder of the 2021 calendar year and whilst this may limit revenue growth in the near term, we remain confident that Audinate can deliver US dollar revenue growth in the historical range for FY22. The launch of Dante video products, record numbers of design wins and the establishment of an engineering team in Cambridge, UK are significant milestones as we execute our strategy to revolutionise the AV industry.

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

Before you consider Audinate, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Audinate wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

More on Technology Shares