The Altium Limited (ASX: ALU) share price has come under significant pressure this week.
Since the start of the week, the electronic design software company's shares are down almost 14%.
This means the Altium share price is now down 18% over the last 12 months.
Why is the Altium share price dropping this week?
Investors have been selling the company's shares this week following the release of its full year results.
Although the company delivered revenue in line with its guidance, its earnings before interest, tax, depreciation and amortisation (EBITDA) was weaker than expected.
In addition, the company pushed back its FY 2025 aspirational revenue target of US$500 million by a year because of COVID-19.
Is this a buying opportunity?
One leading broker that isn't in a rush to invest just yet is Bell Potter.
According to a note, the broker has retained its neutral rating and cut the price target on its shares by 7.1% to $32.50.
Based on the current Altium share price of $29.90, this implies potential upside of 8.7% over the next 12 months.
What did the broker say?
Commenting on its result, Bell Potter said: "FY21 revenue from continuing operations of US$180.2m was slightly above our forecast of US$179.2m and in line with the low end of the guidance range which the company had guided to."
"EBITDA from continuing operations of $60.0m was, however, below our forecast of US$67.2m and the miss was partly driven by a number of one-off factors including M&A costs (US$2.3m), a write-back (US$1.4m) and restructuring costs (US$0.5m). The underlying EBITDA margin including TASKING of 36.1% was still, however, below the guidance of b/w 37-39% so there does appear to have been a negative impact from the shift to term licenses," the broker added.
In light of this margin weakness, Bell Potter has downgraded its earnings assumptions and price target accordingly.
It explained: "We have modestly downgraded our EBITDA and NPAT forecasts by around 3% in both FY22 and FY23. The downgrades have been driven by reductions in our margin estimates which have more than offset increases in our revenue forecasts. We now forecast FY22 revenue and EBITDA of US$214.1m and US$76.5m respectively."
All in all, this leading broker appears to believe investors should hold out for further weakness in the Altium share price before considering an investment.
