Enterprise cloud customer engagement solutions company
Avaya Holdings Corp. NASDAQ: AYVA stock has been in a powerful rally. Shares have handily ripped through its
pandemic in February 2020 outperforming the benchmark
S&P 500 index NYSEARCA: SPY. As we get closer to a
COVID-19 vaccine approval,
pandemic benefactors that bolster
workflow collaboration and customer engagement are seeing additional momentum triggered by the rumored buyout of
Slack Technologies NYSE: WORK by
Salesforce.com NYSE: CRM. Avaya has its Spaces all-in-one video collaboration app which is used in over 100 countries to provide collaborative digital workspaces among distributed groups of people enabling the sharing of content, messaging, meeting and managing of tasks. It’s OneCloud subscription service is a strong growth driver as the Company strives to be a leader in enterprise digital transformation. Rather than chase entries jacked up by additional premiums, prudent investors should watch for opportunistic pullback levels to consider taking some exposure.
Q4 FY 2020 Earnings Release
On Nov. 18, 2020, Avaya released its fiscal fourth-quarter 2021 results for the quarter ending September 2020. The Company reported an adjusted earnings-per-share (EPS) profit of $0.39, missing consensus analyst estimates for EPS profit of $1.22, by (-$0.83). Revenues grew by 4.4% year-over-year (YOY) to $755 million versus analyst estimates of $733.73 million. The Company generated $70 million cash flow ending the quarter with $727 million in cash.
Conference Call Takeaways
Avaya CEO, Jim Chirico, spoke of the acceleration of its digital-first initiatives, “to transform Avaya to a cloud SaaS company.” The cloud, alliance partners and subscription revenue (CAPS) grew to 33% of revenue up 15% YoY doubling the run rate to $1 billion. CAPS subscription activates the Company’s base by bundling addition innovations including Spaces, AI, contact center solutions. It provides a “seamless gateway to transition from on-premise to cloud deployments, resulting in significant growth in our Enterprise Hybrid business.”, stated Chirico. In Q4, the Company signed over 100 subscriptions totaling nearly $200 million. He noted one of their largest wins was one of the “largest banks in the U.S. at the forefront of using technology as a competitive differentiator.” The client has over 1,000 branches in 40 states. The bank is transitioning the migration of over 70,000 users to Avaya from Cisco Systems NASDAQ: CSCO.
Chirico provided a number of client case studies in the quarter from online learning to healthcare systems and call centers managed through CloudOffice UCaaS. Fiscal 2020 saw the annual run rate (ARR) grow by over 400%. The growth of subscription-based service solutions impacted the product revenues dropping to $262 million, down from $315 million YoY. Service revenue rose to $488 million, up from $411 million YoY directly benefiting from the migration to subscription. The Company took advantage of favorable market conditions to utilize a $1 billion senior notes offering and term loan extension to extend $1.8 billion of maturities from 2024 to 2027 and 2028. The Company also executed stock buybacks of 26% of outstanding shares at “well below current trading levels”, according to Avaya CFO, Kieran McGrath.
Full-Year and Q1 Fiscal 2021 Guidance
The Company issued in-line Q1 fiscal 2021 revenues to a range of $710 million to $730 million versus the $716.8 million consensus analyst estimates. The Q1 fiscal 2021 adjusted EBITDA is projected between $165 million to $180 million with margins of 23% to 25%. The fiscal full-year 2021, the Company guides revenues to $2.88 billion to $2.93 billion versus $2.89 billion consensus analyst estimates with adjusted EBITDA of $660 million to $710 million with 23% to 24% margins. The transformation is running on all cylinders and the low-ball estimates can provide opportunistic entry levels for prudent investors.
AVYA Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provides a broader complete perspective of the landscape for AVYA stock. The monthly rifle chart has an active uptrend driven by a powerful stochastic mini pup target the monthly upper Bollinger Bands (BBs) at the $20.69 Fibonacci (fib) level. The monthly stochastic is testing the 80-band, which may provide a pullback towards the monthly 5-period moving average (MA) currently rising at $15.90. The weekly rifle chart formed a market structure low (MSL) buy trigger above $9.98 and has proceeded to grind up on stairstep pup breakouts. The weekly stochastic has been choppy reversing each stochastic crossover down with sharp crossover up reversals squeezing shorts. The $19.56 fib has been a very obvious double-top area which is currently testing as the weekly stochastic crossed back down again. If the weekly stochastic forms a mini inverse pup instead of crossing up, then watch for opportunistic pullback levels at the $17.55 fib, $16.40, $15.11 fib and the $13.48 fib. The weekly 15-period MA has been a strong support level that has deflected three breakdown attempts. The upside trajectories range from the weekly upper BBs at $21.50 up towards the $27.15 fib.
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