Is Altium worth $35 per share?
Altium shares drop ~10% following market update, RBC analysts say medium-term outlook remains strong.
Altium share price falls on market update
PCB design software and high-powered tools company Altium (ALU) today announced that its full-year revenue would likely come in below the current analyst consensus.
The response from investors was a decisive and unsurprising one: In the first hour of trade, the stock was bid as much as 10.29% lower, to $32.62 per share.
At the time of writing ALU traded at $33.44 per share.
Looking at the specifics behind today’s market release, Altium reported that that as a result of the recent lock-down in Beijing as well as the spike in coronavirus cases across the US, the company’s run-rate has started to fall behind the analyst consensus. The timing here unfortunate given the period's importance to the company, with Altium’s management pointing that that it tends to close a significant amount of business during the back-half of June.
In addition to those Covid-related concerns, while the company noted that it was aggressively ‘closing sales’, its recently implemented volume over value pricing strategy – is also set to contribute to a drop off in anticipated revenue.
Altium's CEO, Aram Mirkazemi, noted that this strategy was aimed at supporting ‘our customers and to increase volume under COVID-19 conditions through attractive pricing and extended payment terms is driving strong seat growth and will get us close to or just surpass our key target of 50,000.'
Mr Mirkazemi added that a new, less volume-oriented pricing structure will be implemented from 1 July onwards. Altium is set to provide the market will a full-year sales update in early July.
The analyst take
Though RBC analysts appeared disappointed by today’s downgrade – noting that it rounds out the fourth downgrade in the current calendar year – they do believe that this ‘volume over value’ strategy could pay off in the long-run.
Here, RBC analysts said:
‘Over time we believe ALU should be able to extract higher ARPU from new customers as pricing returns to “normal” levels; however, in the near term this presents a meaningful headwind to revenue and ARPU.’
With it being added that 'Medium term we like ALU’s positive attributes – a global, profitable technology company delivering high sales growth, high margins and net cash position.'
RBC currently has a Perform rating and a $35.00 price target on Altium, implying some upside following today’s pronounced sell-off.
'We await a more attractive entry point,' RBC analysts said.
Want to take a position in Altium: long or short?
Create an IG trading account or log in to your existing account to get started now.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
