Why the Altium (ASX:ALU) share price is sinking today but could rebound strongly

The Altium Limited (ASX:ALU) share price us under pressure on Tuesday. Here's why it is sinking and why it could rebound notably higher…

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The Altium Limited (ASX: ALU) share price has come under pressure on Tuesday.

In morning trade, the electronic design software company's shares are down 4% to $28.78.

This compares to a 0.4% decline by the S&P/ASX 200 Index (ASX: XJO) today.

Why is the Altium share price tumbling lower?

Today's decline appears to have been driven by the release of a broker note out of Citi this morning.

Although the broker has held firm with its buy rating and $33.50 price target, some of its comments appear to have spooked investors and are weighing on the Altium share price.

What did Citi say?

According to the note, the broker points out that Altium has been discounting its platform, which it feels could be an indication of weak trading conditions. As a result, it fears there could be some level of pressure on its second half earnings.

One positive, though, is that Citi's research shows that website traffic data for its Octopart business have been solid. It also notes a positive shift in preference to its Altium 365 platform.

Nevertheless, despite its aforementioned concerns, the broker remains positive on the company due to its belief that Altium's downgrade cycle is nearing an end.

Is the Altium share price in the buy zone?

Based on the current Altium share price, Citi's price target implies potential upside of 16.5% over the next 12 months.

Citi isn't alone with its buy rating. UBS currently has a buy rating and $34.00 price target on its shares and Credit Suisse has an outperform rating and $35.00 price target.

And even more bullish are the analysts at Morgan Stanley. They currently have an overweight rating and lofty $37.00 price target on its shares.

All four price targets suggest the Altium share price could generate market-beating returns for investors between now and this time next year. Which certainly is food for thought for investors.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. 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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