The Altium Limited (ASX: ALU) share price has been the worst performer on the S&P/ASX 200 index on Tuesday.
In morning trade the design software company's crashed as much as 18% lower to $35.04.
Its shares have since rebounded, but are still down 13% to $37.14 in late morning trade.
Why is the Altuim share price crashing lower today?
Investors have been selling the company's shares following the release of the printed circuit board (PCB) design software provider's half year results after the market close on Monday.
During the first half of FY 2020, Altium reported half year revenue of US$92.85 million and EBITDA of US$36.8 million. This represents growth of 19% and 22%, respectively, over the prior corresponding period.
Things weren't quite as positive on the bottom line due to the company moving to the full effective tax rate of 27% ahead of schedule. This meant that net profit after tax fell 2% to US$23.1 million or 17.65 U.S. cents (26.23 Australian cents) on a per share basis. Though, it is worth noting that pre-tax earnings per share grew 23% over the prior corresponding period.
So why are its shares being sold off?
I suspect that it was management's commentary regarding the second half which has spooked investors.
Altium became the latest company to warn that the coronavirus outbreak could impact its performance. This follows similar warnings by both Cochlear Limited (ASX: COH) and Treasury Wine Estates Ltd (ASX: TWE).
Management advised that Altium is likely to land at the lower end of its full year revenue guidance range of US$205 million to US$215 million. This is due to the emerging uncertainty about the impact of the Coronavirus in China and the underperformance of its Octopart business in the first half.
Nevertheless, Altium's CEO, Aram Mirkazemi, appears very confident on the future.
He said: "There is no doubt that Altium has growing momentum toward market dominance and our 2025 targets. Our increase in new Altium Designer seats of 19% and record growth of 16% in our subscription base to 46,693 subscribers puts us well into our climb to reach 100,000 subscribers by 2025. I am confident that we will achieve our target of 50,000 subscribers by full year."
Should you buy the dip?
I think the selloff has created a buying opportunity for investors that are willing to make a patient buy and hold investment.
Whilst its first half wasn't the strongest, its long term growth outlook remains as positive as ever. I remain confident Altium will achieve market dominance in 2025 and generate strong returns for investors.
