The Altium Limited (ASX: ALU) share price is pushing higher on Tuesday.
In morning trade, the electronic design software company’s shares are up 1.5% to $25.84.
Why is the Altium share price pushing higher?
As well as getting a boost from a rebounding share market, the Altium share price was given a lift from a broker note out of Bell Potter.
According to the note, the broker has reiterated its buy rating but cut its price target by 18% to $34.00.
Despite this cut, based on the current Altium share price, this suggests potential upside of over 31% for investors over the next 12 months.
What did the broker say?
With just nine days remaining in the current financial year, Bell Potter believes that “no news is good news” in respect to the company’s guidance.
Altium has undertaken various marketing initiatives this quarter which, while slightly different to years gone by, suggests the company is again targeting subscriber over revenue growth in H2. This is worth highlighting as Altium has provided both revenue and EBITDA margin guidance for FY22 – US$213-217m and lower end of 34-36% – so there is the potential that these initiatives put at least the revenue guidance at some risk.
We do not, however, believe this is the case as: 1. 1HFY22 revenue growth was strong; 2. Altium narrowed the revenue guidance range towards the upper end in late February knowing it would implement these marketing initiatives in Q4; 3. The strong momentum in Octopart in 1HFY22 is likely to continue into 2HFY22 and offset any weakness in China (due to lockdowns) and Russia (due to the war in Ukraine); and 4. No update has been provided to market.
In light of this, its analysts “believe the company is on track to achieve its FY22 guidance.”
Why did Bell Potter cut its price target?
Bell Potter advised that it has cut its target on the Altium share price to $34.00 to reflect “a material decrease in the relative valuations.”
Outside this, nothing else changes. It continues to forecast strong revenue and EBITDA growth through to FY 2024.