The Altium Limited (ASX: ALU) share price has come under pressure this morning.
In early trade, the electronic design software company's shares are down 2% to $42.74.
Why is the Altium share price falling?
While there is broad weakness in the tech sector today, the main driver of the Altium share price decline appears to be a broker note out of Bell Potter.
According to the note, the broker has downgraded the company's shares to a hold rating but with an improved price target of $45.00.
Based on the current Altium share price, this implies potential upside of approximately 5% over the next 12 months.
Why did Bell Potter downgrade its shares?
The note reveals that Bell Potter made the move on valuation grounds after a strong gain over the last couple of months.
For example, prior to today, the Altium share price was up 29% since this time in October and trading within a fraction of its record high.
The broker explained: "At our updated PT of $45.00 the total expected return is only 4% so we downgrade our recommendation from BUY to HOLD. The key risks to our downgrade are, firstly, the company does upgrade its FY22 guidance at the result in February but we believe this is already partly reflected in the share price."
"Secondly, an increased takeover offer from Autodesk and while we believe there is a reasonable chance of this occurring we do not believe there is a high probability. And thirdly a transformative and material acquisition but, as highlighted with Supplyframe, such opportunities are rare and difficult to close so again we do not attach a high probability to such a deal occurring," it added.
What is the broker expecting in FY 2022?
Bell Potter continues to forecast revenue and EBITDA of US$218 million and US$80 million, respectively, in FY 2022. It notes that this is "at the top end or slightly higher than the guidance ranges of US$209-217m and US$72-80m."
However, a potential positive for the Altium share price is that Bell Potter's analysts "also continue to see some prospect of an upgrade to the guidance at the release of the 1HFY22 result in February especially after the company said at the AGM that it is confident that it is not likely to be at the low end of the guidance range."
