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Avanti Communications – worth a short ahead of February 5th results

By Tom Winnifrith | Tuesday 20 January 2015


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Lucian Miers had Avanti (AVN) down as one of his two top shorts for 2015 and so far it is looking a cracking short. Results are looming on February 5th.

The shares have crashed from 320p back in November when they were hyped on the back of spurious rumours that Facebook would bit. It has not and it will not. And so we are left with fundamentals which are grim.

The company is drowning in debt and is not generating cash from its existing fleet of tin cans in space. Its track record of missing forecasts in terms of sales and cash generation is consistent in that it always misses. And thus I am expecting that as soon as the next dismal set of figures come out analysts will be reaching for their red pens once again.

Avanti’s solution to its consistent problem of a dull business model is always the same: borrow even more, issue some more confetti and announce plans to launch another tin can into space. It is sort of Greekenomics on the AIM Casino. When in trouble just carry on as before but at an accelerated rate.

Lucian’s target for the shares – first stop – is 100p. As a one-time believer who saw the light and apologise for prior bullishness some 18 months ago I now agree with the Bard of the Boleyn. At 219p sell.


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Comments

2 comments


  1. James Wilson

    Looks like HYLAS 3 is in trouble of gonna be delayed:
    http://spacenews.com/european-data-relay-satellites-completion-in-doubt/


  2. James Wilson

    Looks like the debt holders are getting the message – price is now below $90. (and they’re the ones who have the best position in the capital structure)
    http://www.epreferreds.com/preferred_freePriceGraph.cfm?cusip=05351LAA&dateRange=31


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