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Is the Altium (ASX: ALU) share price in the buy zone after its update?

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The Altium Limited (ASX: ALU) share price came under pressure on Tuesday following the release of a trading update.

The electronic design software company’s shares fell as much as 5% before recovering to end the day 2% lower at $30.13.

What did Altium announce?

Altium’s update revealed that trading conditions were tough during the six months ending 31 December.

In light of this, the company is expecting to report a 3% decline in first half revenue to US $89.6 million.

Management explained that this decline was “due to extreme COVID conditions in the US and Europe and challenging economic conditions, post COVID in China, for licence compliance activities.”

Positively, the company witnessed an improvement in trading conditions during the second quarter, which has given management confidence that the second half will be much stronger.

Altium’s CEO, Aram Mirkazemi, commented: “I am confident that with our pivot to the cloud and our move to digital sales that the Q2 momentum will continue into the second half.”

In light of this, the company has maintained its guidance for FY 2021.

Is this a buying opportunity?

According to analysts at Credit Suisse, this could be an opportune time to pick up Altium shares.

This morning the broker retained its outperform rating but with a revised price target of $35.00. While it was disappointed with its update, it notes that management has stated that its second half deal pipeline is significant.

Credit Suisse’s price target implies potential upside of 16% over the next 12 months.

Elsewhere, analysts at Goldman Sachs have retained their neutral rating. However, it is worth noting that their price target of $36.35 offers upside of 20% from yesterday’s close price.

That’s better than some of the potential returns on offer with shares that the broker has buy ratings on at present.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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