Audio networking technology maker Audinate Group Ltd (ASX: AD8) is one of the darlings of the ASX this year.
By the end of Monday, the tech stock had climbed a phenomenal 94.45%. It has cooled off a tad since, but it remains the envy of most other ASX shares in 2023.
The business is obviously going well, so is it too late to buy the stock now?
Shaw and Partners portfolio manager James Gerrish recently had some thoughts:
A tug-of-war
The trouble is that there are two opposing forces pulling at the Audinate stock price.
One is shrinking bond yields and pleasing business performance making the bull case for the shares. The other is a weakening US dollar acting as a bear.
So who will win the tug of war?
"At the moment the bull case of lower bond yields and ongoing execution operationally is proving to be the stronger combination, with the stock hitting all time highs," Gerrish told his Market Matters newsletter.
After the spectacular rise this year, the stock could be expensive right now if there are any setbacks.
"Audinate trades on ~105x estimated FY25 PE, a massive valuation which means a lot has to go right to see this stock continue to tick higher.
"We flagged our view that a weakening US dollar could put some pressure on the valuation, but concede that this is a high quality business with strong earnings growth in a sector with a tailwind from lower yields."
Trimmed, but still holding
Gerrish's team holds Audinate in its portfolio with a 65% profit, and he flagged last Saturday that a part of it could be sold off for balance.
And indeed that's what the team did on Monday morning, trimming its holding.
However, Gerrish's analysts are still holding onto some of the shares, implying long-term value.
Many of their peers agree, with five out of six analysts surveyed on CMC Markets currently rating the tech stock as a buy.
Going back to May 2022, the Audinate share price has rocketed an amazing 161%.
