The Altium Limited (ASX: ALU) share price slumped 1.9% lower in yesterday’s trade to $35.23 per share. That could mean there is an opportunity to buy the ASX tech share for a good price as others look to sell.
Why the Altium share price is falling
It was a sharp fall in the value of the Altium share price yesterday given no new announcements from the electronic printed circuit board (PCB) software design company.
Altium is an Australian-American company and I think it could have been a reaction to the United States presidential debate.
Altium generates a significant portion of its earnings in America and is therefore exposed to political risk factors over there.
There’s also the looming decision by the Reserve Bank of Australia regarding interest rates. A lower official cash rate could push the AUD-USD exchange rate lower and have implications for company earnings.
It’s not all doom and gloom right now though. The Altium share price is still up 2.6% for the year despite slumping in recent days.
Is the ASX tech share in the buy zone?
I think there will be more volatility ahead. The US presidential election could continue to worry investors right through until the end of the year.
The Altium share price currently trades at a price-to-earnings (P/E) ratio of 105.7. That’s quite high in normal times, but we’re seeing ASX tech shares trade for much higher multiples.
Many, like fellow WAAAX member Afterpay Ltd (ASX: APT), are yet to even turn a profit. On top of that, Altium shares are yielding 1.1% in dividends right now.
I do think Altium is heavily exposed to potential changes in the US given its core business operations. That includes amendments to various laws covering labour, taxes and trade.
However, Altium did surprise investors with its full-year results. Despite disruptions in FY20, the software design company posted 10% revenue growth to US$189 million. Net profit slumped 42% to US$30.9 million but pre-tax profit climbed 12% to US$64.6 million.
Foolish takeaway
I’d be wary of betting against the Altium share price in 2020. Volatility can be scary but it can also present buying opportunities for brave investors.
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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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