The Altium Limited (ASX: ALU) share price is rocketing higher on Tuesday.
In morning trade, the electronic design software platform provider's shares are up 21% to a 52-week high of $44.77.
Why is the Altium share price rocketing higher?
Investors have been scrambling to buy this software company's shares today after responding very positively to its FY 2023 results release.
After the market close on Monday, Altium reported a 19.2% increase in revenue to US$263.3 million and a 20.3% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA) to US$96 million.
This was driven by a 19.9% increase in Design Software revenue to US$203 million and a 17% lift in Cloud Platform revenue to US$60.3 million. Supporting the former was subscriber growth of 7.5% to 61,159 and a 22.5% lift in the average subscription seat value to US$2,408.
In addition, Altium 365 adoption grew by 54% to over 36,700 monthly active users and by 42% to over 12,500 monthly active accounts.
Also giving the Altium share price a boost is the company's outlook. It is guiding to revenue of US$315 million to US$325 million (20% to 23% growth) and an underlying EBITDA margin of 35% to 37% in FY 2024.
Broker reaction
Goldman Sachs was impressed with Altium's performance and guidance for the year ahead. It commented:
FY23 Sales/EBITDA that was +2%/+2% vs. GSe, with the core B&S business outperforming against a weaker cloud platform. The highlight was the FY24 revenue guide (+8%/+7% vs. prior GSe/VA cons.), but with a step-up in investment subduing margins (in line with GSe, -190bps vs. VA), and driving a strong/in-line EBITDA outcome (+9%/+1% vs. GSe/VA).
In light of this, the broker has retained its neutral rating and boosted its price target to $47.00. This represented over 27% upside from where the Altium share price closed yesterday. Not bad for neutral!
Goldman concludes:
Overall we make meaningful revenue upgrades on higher subscriber & ARPU growth, now forecasting FY26 revenues of US$439mn (+10% vs. prior) vs. $500mn target. Our EBITDA is +8 to 13% on an unchanged margin profile. Reflecting earnings and spot AUD/USD, our 12m TP is +14.6% to A$47.
