How did the Altium share price respond last earnings season?

a small boy dressed in a bow tie and britches looks up from a pile of books with a book laid in front of him on a desk and an abacus on the other side, as though he is an accountant scouring books of figures.a small boy dressed in a bow tie and britches looks up from a pile of books with a book laid in front of him on a desk and an abacus on the other side, as though he is an accountant scouring books of figures.

The Altium Limited (ASX: ALU) share price has moved in circles since the company last reported its results in February.

This comes as the electronic design software company tries to navigate its way through the current challenging market environment.

At the time of writing, Altium shares are edging lower to $30.89, down 1.03% for the day.

This means its shares are down 10% from the time when the company delivered its H1 FY22 financial scorecard.

Below, we take a closer look to see if investors can learn anything from the company’s last earnings season.

What happened in the first half of FY22?

During February 2022, Altium delivered its half-year results for the 2022 financial year to the market.

Despite reporting double-digit growth in sales and profits, investors heavily sold off the company’s shares by more than 9%.

This appeared to be in relation to investors expecting more from the company’s FY22 outlook.

While Altium shares staged a mini-revival in the following weeks, it was short-lived as market confidence deteriorated.

External factors such as rampant inflation, aggressive rate hikes and softer earnings on Wall Street attributed to the cause.

Consequently, Altium shares tumbled to a 52-week low of $24.32 on 12 May before travelling in a sideways channel.

It has only been in the last 4 weeks that its shares have ticked up a notch as the broader market begins to recover.

What should investors look out for?

With Altium due to report its full-year results on 22 August, investors may be wondering what to expect.

Altium upgraded its full-year revenue to be at the top end range of its previous guidance range. This is expected to be between US$213 million to US$217 million in revenue, representing 18-20% growth.

However, management is forecasting the EBITDA margin to be towards the low-end guidance range of 34-36%. This is due to the company pursuing “new cloud and enterprise sales roles in an increasingly competitive talent market.”

Annual revenue growth (ARR) is projected to come between 23-27% for the full year.

Looking further ahead, Altium is confident of achieving US$500 million in revenue, 100,000 subscribers and 95% recurring revenue for FY25/26.

In addition, one broker believes that the electronic design software company will achieve its targets in the near term.

As reported by my Foolish colleague James, Bell Potter noted Altium has taken a different approach in FY22.

It commented on how management is aiming to boost subscriber numbers over revenue growth for the second half. While this may put the above guidance at risk, Bell Potter doesn’t think this will happen.

As such, its analysts have a buy rating on Altium shares along with a price target of $34 apiece. Based on the current level, this implies an upside of 10%.

Altium share price snapshot

In 2022, the Altium share price has fallen 32% on the back of weakened investor sentiment across the tech sector.

For context, the S&P/ASX All Technology Index (ASX: XTX) is down 25% over the same time frame.

Altium has a price-to-earnings (P/E) ratio of 97.75 and commands a market capitalisation of roughly $4.06 billion.

The post How did the Altium share price respond last earnings season? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Aaron Teboneras has positions in Altium. 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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