The Altium Limited (ASX: ALU) share price has edged 3.1% higher this year but it could start to feel the heat.
Why has the Altium share price climbed in 2020?
US and Australian tech shares like Altium have been on fire in 2020. While the coronavirus pandemic has hit many sectors hard, technology is not one of them.
Altium is an electronic printed circuit board (PCB) software design company. Despite concerns over supply chain disruptions and weaker sales, the company posted a 10.1% increase in full-year profit in August.
Alongside its fellow ‘WAAAX’ shares like Afterpay Ltd (ASX: APT), future expected growth has seen the Altium share price outperform the S&P/ASX 200 Index (ASX: XJO) in 2020.
Why could the ASX tech share be under pressure today?
The big news out of the United States overnight was to do with government stimulus. While the Altium share price has been propelled higher by strong government and central bank support, that could be about to change.
US President, Donald Trump, has put further stimulus talks on ice until after the election. That’s currently set to occur on 3 November, which could leave some tech shares with significant US operations in the lurch until then.
There’s a two-fold impact that I can see here. Firstly, less stimulus means less support for businesses which could impact stability and earnings. Businesses won’t get as many subsidies and people are less likely to spend without further government stimulus.
Secondly, it could lead to currency impacts. That could affect supply chain costs and the realised profits from overall sales across the globe.
Altium is largely based in the US with the majority of its executives over there. It also earns a significant portion of its US$189.1 million in revenues overseas which makes the Altium share price worth watching in October.
Foolish takeaway
The Altium share price has had a strong year so far but I think it’s in for a tough time ahead of the US election.
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Returns as of 6th October 2020
More reading
- $10,000 invested in the Altium (ASX:ALU) IPO is worth how much now?
- 2 exciting ASX tech shares to buy and hold for a decade
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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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