Avigilon Stock Plunges On Bad Financials (Q2 2016)

Author: John Honovich, Published on Aug 16, 2016

Avigilon's stock went down 25% the day after it announced earnings.

The stock had already been down by more than 60% from its peak.

The market is very unhappy with Avigilon's performance, and it has to do squarely with Avigilon's quiet slashing of camera pricing 30-50% that we reported exclusively.

In this note, we break down what happened, why the market is so concerned and what to look for next.

********'* ***** **** **** **% *** *** ***** ** ********* earnings.

*** ***** *** ******* **** **** ** **** **** **% from *** ****.

*** ****** ** **** ******* **** ********'* ***********, *** ** has ** ** ******** **** ********'* ***** ******** ** ****** ******* **-**% **** ** ******** ***********.

** **** ****, ** ***** **** **** ********, *** *** market ** ** ********* *** **** ** **** *** ****.

[***************]

Revenue ****** ***** ****

********'* ******* ******, ** ******, *** ****. ******** ** ******* was ** **% **** **** ****, ******** ** **% *** Q1 **** *** **% *** ** ****. *** ** ********'* CEO ******* ***:

** * ******** ******** ***** *** ******* *** *** ****** quarter **** **%, ***** ** ***** ***** *** ****** ********* annual ****** **** ** *%.

*** ****** ********** ** **** ************* ***** *** ** **** underscore *********** ****** ****** *** *********.

Problem *******

*** *** ******* **** *** ******* ****** *** *** **** got *****, ** * ***** ******* ** *******. ***** ******* ******* from **% **** ** **%, ***** ** * **** ***** drop *** ***** *******.

*******, ******** ******** * ****** $* ******* *** **** ******** to * ****** $* ******* *** ****** *** **** ****'* Q2. **** ****** **** *** ***** ***** ****** ******* ********* flat (******* **** ***** *** *** ******** ****** ** ****** the ***** ***** ****) ***** *********** ***** ******** ** *****.

Cuts ******* ******* **** *******

*** ******** ****** ********'* ************ ****** **** **** ****** *** '***** **********', ***** *** primarily *****-**% ***** **** ** ** *******. *** ******* **** * *** ** ******** ******* ****** those *******, ***** ** ** **** ******, ***** *** ****** *********** (though ** *** **** ***** ********* ***** ******* *** ******** is * **** **** **** ** *** **** ***** *** analytics). 

** ***** ******** ********** ****** ***** **** ******** ** *** Hikvision ****** **** ** *** ****** ** ********* ********.

**** ** ****** ** *** ****** *** ****. **** ****** purpose ***** ***** **** ******* ** **** *** ***** *****. The ** **** **** **** *********** ******* *** **** ****** BOM ***** **** ***** ******* ****.

Low **** *** ******** ******

*** **** ********* ******* ****** ****** *** ******** *** ******* "***** ** the ***** ***** ** *** ****** ... **** ** ***-**** with ****** ******."

******** ****** **** *** **** * **** *** **** ****** offering. *********** ** ***** **** (******) ** ******* **** **** *** *** ****, ********** ***** *** ongoing ********* ** ********* *** *****. 

** ******** *** ******* * ********** $*** - $*** ***** lens ******** *** ********** ********, **** ***** **** ********** ******* as ********'* *** *** ********* *** *************** ** ***** ******* competitors.

******:********'* *** "***-****" ***** ** ~$***, ******* ***** ** ******* *** **** *** ** ******** entry ***** ********.

Scare - ******** ***********

******** *** ********* ** ***** *********. *** ****** ******* ** a ****** **** ************* ********. ******** ******* ** **** ******** recently ***** ** * ******* **** *** ********* ***** ** builds ********** *** ****** *******.

*************, *** ******** ** *********** **** ********. ** *** ***** release **** ********:

*** ** *** ****** ** *** ******* ********** ** **** volume *** ***** ****** ** * ********** ** ********, *** Company's ****** **** **** ****** ******** ****** ****** *** ******** Earnings *** *****may ** ********** *****, and the effective income tax rate may be materially different, than *** *******'* ******** for fiscal year 2016 initially disclosed on ***** *, ****.

*** ** *** ****, *** *** ****:

***guidance ******** *********. But what we have done is we've put in our press release and our MD&A a *********** *** ****** ******* *** ** *** *** ****** **** our ********. *** ** ** *** **** *** ******** ** an ****** ********. 

*** **** ** **** **** **** *** ******** *** **** suspended, ********'* *** ***** *** ** ***** ***********. *** ******** is '*********' *** **** ************* *** ******* **** *** ******* *** be ***** **** *** '********'. **** ** ** ******* *****: ******** '************ **********' / '*************' *** 

No **** ********** ***** *********

******* ******** ***** ** ******** ******** ******* ** ********** ***** breakdown. ********'* *** ******** **** "** ******* **** ******* ***** ** ****** ******* ** ******" justifying **** ** ** ***** ** **** ** *** **** 80/20 (*** / **********) *****.

**** ** **** ** **********. ** ** ** ***** ** stay ** *** **** *****, **** ****** **. *** **** is **** **** ********** ****** ********** *** ** **** ** track ******** ** ********'* *** / '*** ****' ********, ***** is ***** ******, **** ***** ***** ******* ************ ** ********* and *****.

Obsession **** ******* ******

********'* *** ******** ******* *** ****:

*** ******* ***** ********* ** ** ** ******* ******* ** gaining ****** *****.

 *** **** *** **** *** ***** ***** *** ********* ** Avigilon. *************, *** ***** *** *******.

Hikvision ******** ******** ****** **** ******** ******* *********

*** ******* ** **** ********* ** ******** ******** ******* ****** than ******** *** **** ******** *******. **** * ****** ***, Avigilon's ************ ********:

"******* ** **** ** ******** ** **** ** [*****] ********"

***** ******** **** **** ******** ********* *** *** ********, ***** value ** ****** *** ****** ** ****** *** ****** ********* is ******* **** ******** *******. ******* *******, ** ***** ** fundamental ***** *******, **********, *** *****, ***, ***. ** ***** *********** for ********** *****, *** ** *** ***** ******.

******** ** ******* * ********* **** ****** ** **** ** with *** ****** ***** ******** ** ********** *******************.

Upside *** ********

******** ****** *** ****** **** ******* **** *** *****, *** **** *******. Because ** ****, ***** ******* *** ** ** ********** ********. Those ******** **** *** ******** ** ******* ******, ****** ******* the ******* **** ** ***** **** **** **** **** ***, but *** ****** ***** **** ** ***** *** ******** ***** to **** *********** *** $*** *******, ***** ** **** *** today.

Sell *** **** **** ******

******** ******* ****** ** **** **** ****** ***. *** ********* stock ******** *** ************* ********* ******* ** ******* ******** **** impetus ** ****. ***, ** * ****** *** ***** *****, Avigilon's ********* ** ******** ****** **********.

** *****'* ~$** *** *****, *** ******* ** ******* ** $350 ******* ***, ***** ****** ** ****** ** **** *******, * **** inexpensive ***** *** * ************ (**** **** *** ** ******* but **** **** ***** ****** ***** ******* ** *** ***** ****).

Comments (25)

*** * ***, ** ********* ****** **** ** ****** *** whole ** ******, *** ******** ***.

***** ****** ******** *** ****, *** ********* *** *** ******** on *** *****.

** *****, ** **** ****** ** ****** *** *** ***** into *********.

***, **** ***** ** * ***** ****** ****.

** *** **** *** *** "*" ****** ******, ** *** perfect!

**********/*** ****** *** **** - **** **** (**********) **** ************ on *** ************ ****.

**** *********** ****. * **** *** *** **** ******* *** market ** ****** *** ** *** ********** ******* ******* * had ** **** ******** ******* **** ******** **** **** ******** so *********.

* **** ** *** **** *** *** ***** ** ****** other ***** **** ********* **** ** ********* *** ****** ******* with ******* **** ********** ********* ** ***** *** ******** ** if **** ***** ** ****** *** ********* **** *** ****** dwindling ** *******.

* *** ** **** ******** ******* **** ******** **** **** affected ** *********.

********* **** ***** ******* *** **** ********.

** *** ****** **** **** ** ******* *** ** ******* it *** ******** ** * '********' ***** ***** **** *** ********** **** ******* *** **** by ******* *** / **********.

*** ***** **** ***** **** ***** *** ** ******* **** ********** ****** ************. ** ***** *** ******* ******, ********** ***** ** ** still *** ********* ** **** *** ******.

** ***** **** ***** ****** ******** **** ********* *** ******** but ********* ********* ***'* **** ***** **** ** **** ** the ***** ****** ****.

*** ** ******* ***** *** ********* ** *** *****

******** ***** ***** *** *** ***** $**, **** **** **** 25%.

******.

** *** ** ** *********** *** ***** ***** ** *** down ** ******** **** ****** ******* ******* ***** ~** ******. 2012 ******** ****** ******* *** ~$*** ******* ***. **** ****** revenue ** ** **** *** $***+ ******* ***. **** *********.

** *** ***** ****, ************* ** *** *******. ********'* **** net ****** *** ~$* *******, ** *** ** ****, *** income ** ********. ********** ** ********* ******, ***** ** * greater *********** *** ********** ******* *** ******* ****** ********** *********** and *** ****** ***** ************ ******* ******* ****, ******** ** in * ***** ********.

***** ****** ********* **** ****, *** ******* *** ******** ********* and *****. ** **** *********** **** *** *** ** ** the ********* ****. ******** *** **** *** **** *** * years, *** **** **** ****/*** ***** ********. ** ** *************, to *** *** *****, ** ***** ** **** ***** **** to ****** ** *** ******* ******. **** *** ******* **** is ** **. ** ***** **** ********* *** ****, *** wish **** ***** ** *******.

**** ***** *******. ****** **** *********** *** *** *****.

** ***** **** ********* *** ****, *** **** **** ***** be *******.

***** *** ****'** **** **** "*******, **** ********".

* ******** ********* **** ***** ** ******** ***** ********* ******** bought ****. ****** ********* **** ******** ******* *** ****** ******* kept ** * ***** ******** *** **** *****. **** *** Sarix **** *** ********** ****** ** *** *** * *** cameras ***** *** ** *** *** **** ************ ****** **** Endura. **** ****** ******** *** *** ******** ********* ****** ** ACC **** ****** ********. **** ***** ******** *** ******* ***** now *** *** *** **** **** **** ******* **** ******** service, ******* *** ***** ***** ********** ******. *** **** ****** of **** **** ******** **** ** ***** ****. ***** **** IP ******* **** ** ****** **********, **** **** ** *** next *** *** *** ** **** *****.

* ***** *** **** ****** *** ***** *** ********* ** to *** ********** **** **** * ***** ******** *******, *** IMO ***** *** * **** ****** ****** ** *** ****.

** *** ****** ** **** ******** **** ** ****** **** Avigilon, **** **** *** ****** ** ****. ***** ***, ******* wise, **** *** **** ** ***** *******. ******** ****, ******** not.

***, * **** ***** * ******** ** ******** ** **** for *********, **** *** ****** ********** *** * *** ** need *** ****. *** ***** ******, ** ***** ** *******.

***** *** * *** ****** ** *** ** **********:

*) **** **** ******** **** **** $*** ******* ** ********* with ** ******* ****** ** *** **********. ***** ******* ******** of ***** *** ********* ** *** ******* ** ****** ***** competition **** ***** *** ****** **** *** ***** ** **** a ***** ********** ** ***** ******** **** *** *********.

*) ***** ******* ** * ********* ************* ******** *** * terrible **** ** **** ****** ******* **** *** ******** ******** could ******* ***** ********* ***** ****** ***** *** *** ** 2017. *** ******* *** ********* ********* ( *** ** ** $54 ******* ** ******* ** $** ** *** ***** ** 2015), ********* *********, **********, ***.. *** ******** **** **** *** needed.

*) ***** ********* ******** *** ******* ************ **** $*** ******* Cash ** *** ***** ** **** *** ** **** ** one ** ******* **** *** **** **** **** ** $** Million ( * ***** ** **** **** $*** *******). ***** receivables *** $** ******* **. $** ******* ** *** ***** of **** ( ***** ***** **** ****** ****** **** *****).

"**** **** ******** **** **** $*** ******* ** ********* **** NO ******* ****** ** *** **********."

***** ** ~$*** ******* **** ** *** ******* *** * do ***** **** **** **** ** **** * ****** ****** rather **** ***** ** **** ** **** **** ******* ** far **** ****** ********* *** **** **********.

***** ******* ** * ********* ************* ******** *** * ******** move

**** ** ** *********** ***** * *** *** **********. * do *** **** ****** ** ****** **** ***** *** *** element ** **** ***** ** **** *** ****** ******** *** to **** *** ** $* ******* ** *******, ***** ** looking **** *** **** *********** ***** ***** ****** *****.

***** *********** *** $** ******* **. $** ******* ** *** start ** **** ( ***** ***** **** ****** ****** **** sales).

* ******* ** *** $** ** *** ***** ** ****, see:

* ** ***** **** *********** ********* ************* **** *** *** of ** ** ** **** *** * ** *** **** how ***** **** **** **** **** ******.

*** ***** ******* ** *** **** ****** / ********* / pleading ***. *** ******** ******* ** *** *** ** ** to *** *** ****** ** **** ** ***. **** **** have ***** *** ******* **** **** ****** *** *** ** the *******, ** *** **** **** *** ** ** ** did **** **** ** ** **** ** **** *****, ***** could *** **** ******** ** **, ***.

**** **** **** ***** *** ******* **** **** ****** *** end ** *** *******, ** *** **** **** *** ** be...

******* ** ****** ** **** ************?

***** ***** *** $** **. $** *******, ****.

* **** ** ******* ***** ** *** ********* *********** *** for **** ** ** ****** ****** ****** ** ***** - stuffing *** *******.

** *** *************; **** ***** **** ******** ***** ****** ******** before *** *** ** **** ** **** *** ***** *****. Much **** ****** **** ********* **********. *** ***** ************* **** was ***** *** ******** ** *** ***. ** **** ****** a ****** ******** **** ****** **** **** **** ** ** China *** *** *** ******* ** *** ***** ***** **. the ***** *****.

"** **** ****** * ****** ******** **** ****** **** **** done ** ** ***** *** *** *** ******* ** *** costs ***** **. *** ***** *****."

*** **** ********* / ***** **** ****, **** *** ************ say **** *** **** ** *** ***, *******, **** ** ;)

***'* ****** ****** :)

******** ******* ****** ** **** **** ****** ***. *** ********* stock ******** *** ************* ********* ******* ** ******* ******** **** impetus ** ****.

* *****.

**********, **** *** ***** ******* ***** *** **** ******* ***...

********* ***** *** **** ** *** ********* ** ************* **** nothing *** *** ***** ***** *** ***** ******* ** **** the ******* ** * ***** **** ***** ****.

*** ********* ********* ***** *** ****** **** ******. **** **** give * ******* **** ** *** ***** *** ******** ** far **** *** ***** ** ***** ** **** ** ******.

********* **** * */* ** * ***** *** ** ** investor **** ********* **** *** ******* ******* **** **-**. ** told *** ******** **** ******** *** *********** ***** **** ****** to ***** ***** *** **** *** ****** ***** **** ** the ******. **** ******** ** **** ******* ( ********* **).

********* ***** *** **** ** *** ********* ** ************* **** nothing *** *** ***** *****...

******. ****** ** **** **** ** **** **, ****, ** could ***** * ***** **** ***, ** ** *** ** the **** ********** *** *** **** ***** **** ****.

**** *****, **** ******* *******.

** *** ~* ***** ***** *** ********** **** ********, ***** is **** ******* **.*% ******** **** ~$** ** $*.**. **** to *** ********* ******** ***** **** ****** **** ** *********** becomes ********** **********, **** * ****** *** ** *** ***** $300 ******* ***, ***** ** **** ****'* *******.

*** *** ******* ***** ******* ********. * ***** ***** **** their ********** ***** **** **** *** *** *** ***** ****** cap ** ** ********* ** *** ********. **** **** *** sure **** *** ********* **** *** ***** ***** ** *** low ***** ***** ** ******* **** *** ***** ******** ******* will ** **** **** **** **** ***** ***** **** *** bring ******* ** ***** **** ** * **** ****** *****. Unfortunately **** *** ** * **** ****** **** **** ******** and *** ****** ****** **** ** *****.

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