AVID

Publicly traded companies mentioned herein: Avid Technology Inc (AVID)

Highlights

The presenter is long shares of Avid Technology Inc (AVID), a provider of audio/video software and hardware products for the media and entertainment industry. Its customer base is skewed toward the high end with primary customers including post-production facilities and professional film, television, and music studios. AVID is well positioned to compete in the market because its software is the “de facto industry standard” for editing on the high end. Despite its strong asset, the company has historically been mismanaged, which led to years of weak FCF generation. Over the last two years, however, AVID’s new management team has reinvigorated the company by transitioning the business to a subscription model, gaining share within the low end of the market, and focusing on FCF generation by cutting costs and cleaning up the balance sheet. As a result, the presenter now views AVID as a high quality business with a dominant market position and a positive secular backdrop (i.e., it is tied to content spend, which grows HSD%+ annually). Over the next two years, he expects the Street to revise expectations upward and for the stock to trade at a higher multiple, culminating in its share price doubling from the current ~$15.