Top broker names Altium (ASX:ALU) share price as a buy

Is it time to buy Altium shares?

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The Altium Limited (ASX: ALU) share price has been a disappointing performer in 2021.

Since the start of the year, the electronic design software company’s shares are down 4.5%.

Why is the Altium share price underperforming?

The weakness in the Altium share price this year has been driven largely by its mixed performance in FY 2021.

Although Altium achieved its full year revenue guidance with a 1% lift to US$191.1 million, its earnings fell short of expectations due to weaker margins.

In addition to this, while management is confident on the company’s prospects in FY 2022 and is guiding to revenue growth of 16% to 20%, it has pushed back its US$500 million aspirational revenue target by a year to FY 2026.

Also weighing on Altium’s shares was its rejection of a takeover approach from Autodesk. The software giant tabled an offer believed to be around $40.00, but management wasn’t interested. It believed it significantly undervalued Altium’s prospects.

Is this a buying opportunity?

One leading broker appears to believe the underperformance of the Altium share price could be a buying opportunity.

According to a note out of Citi from last week, its analysts have a buy rating and $35.40 price target on the company’s shares.

Based on the current Altium share price of $32.98, this implies potential upside of 7.3% over the next 12 months.

Citi was pleased with the company’s guidance for FY 2022, particularly given the headwinds it is facing from its shift to subscriptions from perpetual licenses.

In addition to this, the broker is positive on Altium’s longer term growth potential. It expects this to be underpinned by the monetisation of its Altium 365 and Nexar platforms.

This could make it a tech share to consider in October.

Should you invest $1,000 in Altium right now?

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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.

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