The Altium Limited (ASX: ALU) share price has fallen by almost 30% since the start of 2022. It begs the question: Has the ASX tech share dropped so much that it's too cheap to ignore?
Altium is one of many technology businesses that have declined substantially this year. For example, the Xero Limited (ASX: XRO) share price has dropped 35% in 2022 while the Appen Ltd (ASX: APX) share price has sunk 38%.
There are plenty of issues making headlines right now such as the impacts of the Russian invasion of Ukraine, global inflation, potential interest hikes, and supply chain problems.
But, after the Altium share price decline, is it excellent value?
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Analyst thoughts on the Altium share price
After seeing Altium's recent FY22 half-year result, Macquarie analysts rated the ccompany as 'underperform'.
The result and management commentary were stronger than Macquarie had forecast, though the broker expects the second half of FY22 to show slower growth. It also noted that Altium's outlook for acquisitions is better given the decline in valuation of many technology businesses.
The Altium price target from Macquarie is just $25.90. That's almost 20% lower than it is today.
However, Citi is a bit more optimistic. Citi is 'neutral' on the ASX tech share. The broker's Altium share price target is $34.10, suggesting a possible upside of 8% over the next year. Citi is expecting ongoing investment into research and development by Altium, which may impact profit margins.
FY22 half-year report wrap
For investors who didn't see the result, Altium achieved growth in most areas of its business in the first six months of the 2022 financial year.
Altium's revenue grew by 28% to US$102 million. Octopart, the electrical parts search engine division, saw revenue surge by 105% to US$22 million. Octopart is being helped by tailwinds from the global electronic parts shortage.
There was double-digit revenue growth from all regions, except China, which only grew by 6% as the nation felt the temporary impact of regional COVID-19 lockdowns.
Annual recurring revenue (ARR) rose 43% year on year and recurring revenue now accounts for 74% of total revenue, up from 65% in the same period last year.
Earnings per share (EPS) rose by 37% to 17.4 cents and operating cash flow jumped 78% to US$33 million. The board decided to increase the interim dividend by 11% to AU$0.21 per share.
Growth outlook
For Altium, a key part of its growth plan is scaling its cloud offering. Altium 365 allows engineers to collaborate and access their designs from anywhere. It is proving to be popular. In the first six months of FY22, its number of monthly active users reached 19,700 – this was a 54% increase since August 2021.
The ASX tech share upgraded its revenue guidance for FY22 to the high end of the forecast range. Revenue is expected to grow between 18% to 20% to a range of US$213 million to US$217 million for the financial year.
Altium share price valuation
Based on Citi's FY22 profit estimates, Altium shares are valued at 62x forecast earnings.
However, Macquarie's lower profit estimate puts the Altium share price at 63x FY22's forecast earnings.
