Is the Altium Limited (ASX: ALU) share price a buy after the electronic PCB software business gave investors a business update yesterday?
Here's what Altium revealed
Altium said that since the last market update in early April, it's anticipating some headwinds due to coronavirus impacts in the US and Western Europe.
May and June are typically the strongest months of the year for closing sales. So it's going to cause problems for Altium's FY20 result with the cash preservation priorities of small and medium size businesses affecting Altium's sales. But Altium did say that engineers are still working on prototype designs. The electronics industry is still holding up relatively well.
In response to the problem, Altium has launched 'attractive pricing' and extended payment terms to drive volume. That's not beneficial for revenue, margins or cashflow in the short-term. But I think it makes sense for the longer-term. Altium's plan is to become the clear market leader by 2025, what happens in FY20 and even FY21 is less important than continuing to grow long-term market share.
The Altium share price fell almost 4% yesterday.
Altium is working even harder on rolling out its new cloud platform Altium 365 so that more clients will adopt to working on the platform. Altium 365 Standard was made available to all subscribers on 1 May 2020. According to management, it's "off to a great start". It won't drive short-term revenue, but it's important for transforming the industry and improving the recurring revenue.
The company said it's still profitable and has a cash balance of more than US$77 million.
Due to the disruptions, the goal of US$200 million revenue this year is unlikely to be met.
Is the Altium share price a buy?
At around $35 the Altium share price is looking a little expensive for the short-term considering yesterday's news. There could be heavier economic impacts to come this year. Though the very low interest rate does supposedly boost asset values.
Over the long-term I think investors will still do quite well at $35, but I'd rather buy at around $30. It'd be even better to buy for price much cheaper than $30, but we don't know what the Altium share price is going to do.
