It’s quite rare that the Altium Limited (ASX: ALU) share price is among the worst performers on the S&P/ASX 200 Index (ASX: XJO).
It is even rarer for the electronic design software company’s shares to be the worst performer on the index.
But that is the case on Monday, with the Altium share price down over 8% to $33.31 in afternoon trade. At one stage its shares were down almost 13% today.
Why is the Altium share price sinking lower?
Investors have been selling the company’s shares after it released a disappointing trading update.
Despite the company launching attractive pricing and extended payment terms during the pandemic, it hasn’t been enough to offset the tough market conditions it is facing.
And although the company expects to deliver “solid” sales growth in FY 2020, it will fall short of the consensus estimate of US$192.5 million.
This is because traditionally Altium closes a significant amount of its second half business in the final two weeks of June. But with increased COVID-19 infection rates in the United States and a recent lockdown in Beijing, this won’t be the case this year.
Is this a buying opportunity?
While today’s share price decline is disappointing, I think it has created a buying opportunity for investors that are looking to make a long term investment.
I’m confident that Altium’s underperformance this year is strictly pandemic-related and expect it to bounce back once the crisis passes.
Overall, I believe that industry tailwinds remain very supportive of its long term growth and expect it to achieve its 100,000 subscribers target by FY 2025.
Combined with its other promising businesses, such as Octopart and NEXUS, I expect Altium to grow its earnings at an above-average rate for many years to come. This could make it a market-beater over the 2020s.
But if you’re not sure about Altium, then check out the five shares recommended below…
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*Extreme Opportunities returns as of June 5th 2020
More reading
- Why Altium, Australian Ethical, Flight Centre, & Transurban are dropping lower
- ASX 200 flat: Altium update disappoints, Metcash posts full year loss
- These 5 ASX shares were last week’s top performers
- Altium share price sinks 7% lower after FY 2020 trading update
- Where I would invest $50,000 into ASX shares immediately
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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