Could Altium shares benefit from the global chip shortage?

Supply chain headwinds aren’t bad for all companies…

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Key points

  • Altium shares are in the spotlight amid global semiconductor chip shortages
  • Some research points to the supply issues easing in FY22 but analysts also see potential benefit to Altium's bottom line from the increased demand
  • In the last 12 months the Altium share price has lost 28%

The Altium Limited (ASX: ALU) share price has tracked lower in 2022 and is now in the red by 42% since the start of the year.

At the time of writing, the electronic design software company’s shares have gained 2.32% on the day to trade at $26.29 apiece.

In broad market moves, the S&P/ASX All Technology Index (ASX: XTX) has also slipped in 2022 — by 38% — but is up 1.73% from the open today.

Altium share price to benefit from chip shortage?

Demand and supply gaps for semiconductor chips have led to global shortages of the product. These shortages have plagued many industries since 2020 when the COVID-19 pandemic began.

“Last year, supply tightness dovetailed with the rebound in consumer and business demand, causing a lot of headaches across the supply chain,” says Counterpoint Research.

It says these shortages are starting to ease, and that inventories are starting to build back up in order to fill demand.

“The issue now isn’t shortages but a shock to the system from lockdowns, which is having a domino effect across China at the moment,” it added.

Nevertheless, analysts at Morgan Stanley note the global semiconductor chip shortage could be a net positive for ASX shares such as Altium.

The Morgan Stanley team reckons the market has overlooked how the company is benefiting from the current supply-chain headwinds plaguing global markets, Hans Lee of Livewire writes.

Specifically, global chip shortages have led to a surge in demand for Altium’s products, it says, which is a potential sales tailwind.

The broker values Altium at $35 per share on a buy recommendation.

There are still plenty of other risks to contend with right now for ASX shares. Plus, with the Altium share price down more than 28% in the last 12 months, it has a way to go before recovering to former highs.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. 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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