Here's what this top broker thinks of the Altium (ASX:ALU) share price

The Altium share price has fallen heavily this week…

| More on:
A male ASX investor wearing glasses and a beanie and denim shirt puts his hand to his chin wondering whether to buy ASX shares

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Motley Fool contributor 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 has recommended Altium. The Motley Fool Australia owns shares of and has recommended Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Broker looking at the share price.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Broker Notes

Guess which ASX 200 share offers 12% upside and a 4% dividend yield

Bell Potter just slapped a buy rating on this stock.

Read more »

A man leaps from a stack of gold coins to the next, each one higher than the last.
Broker Notes

Qantas or Telstra share price: Which will climb higher in 2024?

Let's see what top broker Goldman Sachs has to say about these ASX blue-chip stocks.

Read more »

A woman smiles as she sits on the bus using her phone and listening to music through headphones.
Small Cap Shares

3 small-cap ASX shares with 'long runways for growth'

DNR's Sam Twidale reckons investors could do worse than buy these guys for the long run.

Read more »

Woman using laptop for job search
Investing Strategies

2 ASX 200 shares to buy for 'strong growth' at decent prices right now

Searching for a bargain? Here's a pair that Catapult's Dylan Evans has his eyes on at the moment.

Read more »

A Paladin Energy miner wearing a hard hat and protective gear stands in front of a large mining truck and smiles to the camera.
Energy Shares

Uranium is set to boom, and this is the 'premium' ASX stock to buy

Shaw and Partners' Jed Richards reckons these are the shares to buy for the nuclear energy theme.

Read more »

female in hard hat crosses fingers
Investing Strategies

The ASX 200 stock that could get second time lucky

These shares have failed to impress in 2024, but many experts believe it's a bargain buy.

Read more »