The Altium Limited (ASX: ALU) share price has been up and down in 2020, but is it set to surge in the second half of the year?
What’s been happening to the Altium share price?
Altium is a software company that provides PC-based electronics design software for engineers who design printed circuit boards. It’s been something of a rollercoaster for the ASX tech company in 2020, with less international trade, reduced business expenditure and potential supply chain disruptions weighing heavily on the Altium share price in March.
Altium is part of the WAAAX group of tech shares that have rocketed higher in recent years. While Altium does have a 1.03% dividend yield, much of its value is tied up in future expected growth. In fact, Altium trades at a price-to-earnings ratio of 59.82, which is why investors were spooked by the COVID-19 shutdown.
At the height of the February earnings season, Altium hit a new 52-week high of $42.76 per share. It was downhill from there as the S&P/ASX 200 Index (ASX: XJO) slumped amid a broader bear market. The Altium share price fell to a 52-week low of $23.11 per share before recovering to its current $36.79 valuation.
Is Altium in the ‘buy zone’?
It’s been an impressive share price recovery for Altium in April and May. Altium is still trading below its pre-COVID-19 value but the economic outlook has certainly shifted. I personally don’t think Altium’s valuation is compelling enough to buy right now.
If we see another bear market drop then I’d look at buying Altium for the right price, however, I think there are other strong ASX tech shares that could be in the buy zone, like Xero Limited (ASX: XRO).
Foolish takeaway
The Altium share price has been on a rollercoaster ride this year. Altium is a dividend-paying share that does provide some security, but I still think I’ll wait for another market dip before buying in.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. 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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