It has been a disappointing year so far for the Altium Limited (ASX: ALU) share price.
Since the start of the year, the electronic design software provider's shares have fallen 10% to $31.08.
Is the Altium share price weakness a buying opportunity?
One leading broker isn't sure this is a buying opportunity and feels the Altium share price could be trading around fair value present.
According to a note out of Bell Potter, its analysts have a hold rating and $32.50 price target on the company's shares.
Based on the current Altium share price, this implies modest upside of 4.5% over the next 12 months.
What is Bell Potter saying?
Bell Potter was a touch underwhelmed with the company's performance in FY 2021. While its revenues from continuing operations came in a touch above its estimates, its earnings fell well short due to weaker margins.
Unfortunately, those weaker margins are expected to persist, which has led to Bell Potter downgrading its earnings estimates.
The broker 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."
In light of this, the broker doesn't see enough value in the Altium share price to warrant a buy rating.
It commented: "We have updated each valuation used in the determination of our price target for the earnings changes and also reduced the premium we apply in the relative valuations from 25% to 10% given the strong rally in some of the comps (e.g. WiseTech). The net result is a 7% decrease in our PT to $32.50 and we maintain the HOLD rec."
