Avita Medical Share Price Hovering Below 50 Cents (ASX:AVH)

With the Avita Medical Ltd [ASX:AVH] share price sitting at 45 cents at time of writing, let’s take a quick look at this stock that lit up the ASX prior to the onset of the coronavirus.

Avita recently announced a plan to relocate from Australia to the United States. This was done with the view that the advantages of the move will outweigh its disadvantages and risks.

Noted in the announcement, the board believes the move will:

Substantially reduce the costs, burden, resourcing, and risks associated with dual financial reporting and related compliance obligations that the Company has become subject to in both the United States and Australia (since 31 December 2019).

This is expected to save approximately AU$400,000 per annum in external professional costs alone.

The regenerative medicine company with a market cap of $906.71 million, at the time of writing, appears to be taking this bold step so in the future they can align themselves with a broader range of capital investors in the US.

In many ways, it makes sense.

In terms of cumulative market cap, the NASDAQ is massive compared to Australia’s ASX and many Aussie companies working in the healthcare sector seek to crack this lucrative market.

Avita share price: the present

Avita makes and sells the product RECELL®, which is a spray on system designed to treat burn victims.

Avita’s foothold is in the US, with it being noted in recent announcements that Avita ‘derives virtually all its revenue from the US’ and has no physical presence outside of the country.

You can see the weekly chart for the Avita share price below:

ASX AVH - Avita Share Price Chart 1

Source: Optuma

Avita share price: the future

On a technical basis, Avita had a pull back in share price over two weeks, falling back just under 61.8% of the previous range, a strong level in the Fibonacci scale. This falls in between two historical support and resistance levels of 33 cents and 54 cents.

ASX AVH - Avita Share Price Chart 2

Source: Optuma

The current bar on the weekly chart holds a close higher than the open, indicating a move up, yet this was not supported by volume. From this it may be assumed the share price could continue to fall, in that case support level of 33 cents may come into focus.

Should price return to the upside, resistance levels of 45 cents, 52 cents, and 58 cents may come into play.

ASX AVH - Avita Share Price Chart 3

Source: Optuma

The next few weeks may be a very interesting time to watch Avita, it could cut in two directions quickly.

Stinging from the AVH share price drop? If you want to learn about the two types of assets that could benefit from this new investing environment, download a free copy of ‘The Coronavirus Portfolio’. In it, my colleague Lachlann Tierney runs you through the kinds of investments he thinks have the most potential in the downturn.

Regards,

Carl Wittkopp,
For Money Morning


Carl Wittkopp writes for Money Morning and has a diploma in Financial Planning. He specialises in technical analysis.


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