VANCOUVER, B.C., Canada — Avigilon Corp. (AVO), one of Canada’s worst-performing stocks after outpacing the market last year, is on a spending spree as of late that some analysts say is jeopardizing the company’s profitability, according to a news report.
The provider of network-based video systems for San Diego’s public transit system and Toronto’s Rogers Centre stadium has dropped 33% this year, the third-worst performing stock on the Standard & Poor’s/Toronto Stock Exchange Composite Index, according to Bloomberg. That follows a 583% gain between the Vancouver-based company’s initial public offering in November 2011 to December.
“It’s short-term pain for long-term gain,” Avigilon CEO Alexander Fernandes told Bloomberg. “If we were to reduce investments in future growth, we could dramatically increase the bottom line, but that would come at reduced gains in the longer term.”
Avigilon’s goal is to upgrade surveillance cameras to high-definition quality, enabling customers including retailers and governments to protect against theft or terrorism by providing detailed images usable in court or by facial recognition software, Fernandes said.
Avigilon reported second-quarter adjusted earnings of 6 cents a share on Aug. 7, 63% below the average analyst estimate of 16 cents. Sales rose 66% to C$65.2 million, according to data compiled by Bloomberg. The stock fell 11% the next day, the most since CFO Bradley Bardua unexpectedly resigned for health reasons in early May.
The company is targeting sales of C$500 million ($458 million) by the end of 2016, up from a projected C$260 million at the end of 2014, Fernandes told Bloomberg. Avigilon announced a 69% increase in sales and marketing expenses in the second quarter over a year earlier, a 128% rise in general and administrative expenses and a more than doubling in spending on research and development.
After spending $32 million to acquire video analytics provider VideoIQ in January, Avigilon raised C$100 million in a share sale in April.
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