Can the Altium share price regain its previous highs in 2022?

It’s been a difficult past few months for the Altium share price.

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Key points

  • Altium shares have lost 40% so far in 2022 following a heavy sell-off in the tech sector
  • The latest US consumer price index report is likely to further drag down the Altium share price this week
  • While several economists are predicting a US recession in 2023, some brokers believe Altium shares are undervalued at current prices

Like many other tech shares, the Altium Limited (ASX: ALU) share price has had a shocker of a run so far in 2022.

After reaching an all-time high of $45.30 on 30 December, the electronic design software company’s shares closed Friday’s session at $27.08. That represents a fall of more than 40% in the space of under six months.

While shares in the former market darling are down for now, let’s take a look at whether a recovery is on the horizon.

Can the Altium share price recover lost ground?

Despite the company reporting a strong performance in its half-year results in February, the Altium share price has tanked. A 35% drop across the S&P/ASX All Technology Index (ASX: XTX) so far this year is taking a major toll.

A perfect storm of rising inflation as well as a global semiconductor chip shortage and general economic slowdown is sending tech investors fleeing.

And with Wall Street officially entering bear market territory overnight Aussie time, this week looks set to deliver more bad news for investors.

A number of economists are forecasting a recession in the United States within the early part of 2023.

The US consumer price index report released on Friday showed that inflation jumped 8.6% last month, more than the 8.3% forecast. This is the highest monthly inflation jump in the US in 41 years.

Inflation is continuing to be a key driver of share markets globally as investors brace for more rate hikes from the US Federal Reserve.

It’s worth noting that Altium’s revenue base is predominately derived from the United States, followed by Europe and then China.

The company does, however, remain debt-free and has a net cash balance of US$195 million (as of 31 December).

What do the brokers think?

A number of brokers weighed in on the Altium share price following the release of the company’s half-year financial scorecard.

According to ANZ Share Investing, Jefferies cut its price target by 4.5% to $42.61 apiece for Altium shares. Based on the current share price, this still implies an upside of approximately of 57%.

In addition, Bell Potter has a ‘buy’ rating and a $41.25 price target. This reflects a potential increase of around 52% from where Altium shares last traded.

Altium share price snapshot

A rollercoaster 2022 has led the Altium share price to register a loss of 40% for the period.

The company’s shares hit a 52-week low of $24.97 last month, and have struggled to regain much ground since.

On valuation grounds, Altium presides a market capitalisation of roughly $3.56 billion.

Motley Fool contributor Aaron Teboneras has positions in Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Altium. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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