Audinate share price stumbles on trading update

The Audinate share price could be facing pressure as some investors may have been hoping for more than a 20% plus increase in revenue.

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Key points

  • The Audinate share price dipped even as management is forecasting FY22 sales to exceed US$30 million
  • This represents around a 20% plus increase over the previous year, but some may have been hoping for more
  • Chip shortages more than demand weakness is weighing on sales, and Audinate is taking steps to overcome this challenge

The Audinate Group Ltd (ASX: AD8) share price is see-sawing today, as the company releases its latest trading update forecasting a jump in revenue.

The audio visual networking company is expecting FY22 revenue to exceed US$30 million versus the US$25 million from the previous year.

Investors appear torn by the news with the Audinate share price flip-flopping between gains and losses. It’s currently up 0.43% at $7.03, after bouncing from red to green and back every 30 minutes throughout trade on Monday. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has shed 0.4%.

Muted response from the Audinate share price

Management noted that trading conditions in March and April have continued through May. The company had been hit by chip shortages in the first two months of calendar 2022, which crimped sales.

But Audinate managed to build up its inventory of chips used in its Brooklyn and Broadway products in March.

This resulted in strong ongoing grading conditions in April. Although, gross margins could be negatively impacted by the additional purchase of the chips.

The company said in its ASX announcement:

We continue to actively manage a challenging supply chain environment. Audinate will use the upcoming InfoComm tradeshow 1 in Las Vegas from 8th-10th June 2022 to brief our manufacturing customers and end-users on the actions we have been taking to manage and mitigate chip shortages.

High growth hurdle

The Audinate share price could be facing pressure as some investors may have been hoping for more than a 20% plus increase in revenue. After all, the ASX tech company is in a high-growth sector.

But management hasn’t quite stated how much above US$30 million sales could hit. Also, the weaker Australian dollar could help as well, with the exchange rate around 4% better than at last year’s results.

Can the Audinate share price overcome supply chain headwinds?

Audinate has also implemented strategies to overcome the global chip shortage challenge. It’s lobbying its strategic chip making partners to increase allocation of chips for its products. These partners include Xilinx, NXP and SkyWorks (formally Silicon Labs).

The company has also announced the new generation of products to replace its existing offering. This includes Brooklyn 3, which replaces Brooklyn 2; and Fremont 3, the replacement for the Dante AV Fremont module.

Lastly, Audinate is focusing on ramping sales of its software solutions, such as Dante Embedded Platform and Dante IP Core.

The Audinate share price has not been spared from the recent tech sell-off despite its dominant position in its industry. Audinate shares have lost close to 10% over the past year, while the ASX 200 has shed less than 1%.

Motley Fool contributor Brendon Lau has positions in AUDINATEGL FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended AUDINATEGL FPO. The Motley Fool Australia has positions in and has recommended AUDINATEGL FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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