Markets always hard to read short term in my opinion. One thing worth remembering though; 1 or 2 years of cash flows makes up a very small part of the total DCF valuation. If the longer term structural shift in this industry is genuine, and Audimate a likely winner, covid impact is probably just a small factor. That's being said, I don't own and haven't done the necessary work to have a high conviction valuation.

I sold out of AD8 on valuation grounds. It is now trading at an eye watering EV/S of 12.8, yet is revenue below 30% pa. For me, it just doesn't stack up, unless growth accelerates to above 40% pa. It has similar gross margins, % cashflow, and rev. growth rates to PPH, but is valued 50% higher on an EV/s basis. Having said that, I would love to own it at a reasonable valuation.

The risk/reward trade-off now at $5.50 to $6 is obviously not as compelling as it was sub-$4, but I think the investment thesis is that the Dante platform has developed such a market share now that their competition is really irrelevant. It is highly likely that Dante will continue to be the dominant platform for digital AV into the future. I'm not the first person to say this, however it's probably really useful to think about it this way: If Bluetooth was a listed company, what would it be worth now? Bluetooth are completely dominant in wireless data transfer over short distances and device manufacturers don't have much choice - they have to include Bluetooth connectivity in their devices or else immediately be at a commercial disadvantage to their competitors. AD8's Dante platform will be similar. Everybody will be using it - as long as it continues to be the dominant platform for digital AV, and they don't currently face any SERIOUS competition. They of course DO have competition but that competition is largely irrelevant because of Dante's dominant market share. They are a juggernaut that has been temporarily coronered, but their ascendancy will continue. They don't have any structural issues, only temporary ones that everyone else in the industry are also facing. In their own words, Dante replaces point-to-point audio and video connections with easy-to-use, scalable, flexible networking. Adopted by hundreds of manufacturers in thousands of professional products, Dante is the de facto standard for modern AV connectivity. That's the investment case. How big can they get. Bloody enormous I reckon, but I don't know how long it will take. I think there's a better than 90% chance they will get taken out by a much larger company at some point at a very healthy premium to their share price at that time. But I very rarely buy into companies on takeover speculation or potential. The fact is that AD8 have developed and are rolling out a technology that WILL almost certainly be the dominant platform in the future (as it is already) and it's hard to imagine the upper limits of what that's going to be worth in future years, but it's almost certainly a lot more than their current share price. That future potential is very hard to value accurately today, but trying to come up with a half-sensible valuation for Bluetooth (as if it was a listed company) might be a good starting point.