Another Autodesk bid could be a welcome kicker for Altium

While 2022 year-to-date has not been kind to Altium (ASX: ALU), with the share price down around 22% since 31 December, Bell Potter has upgraded the software company to Buy from a Hold on the back of what the broker expects to be strong catalysts for the stock.

For starters, Bell Potter expects Altium to report first half FY22 revenue and earnings growth of 24% and 29%, respectively, when it reports on 21 February 2022.

Bell Potter also expects the company to upgrade its FY22 guidance.

FY22 revenue growth

The broker expects Altium to deliver FY22 revenue and earnings of US$218m and US$80m, at the top end or slightly higher than the guidance ranges of US$209-217m and US$72-80m.

Adding to that optimism, in November, Altium CEO Aram Mirkazemi was confident the company could achieve its FY22 guidance of 16-20% revenue growth.

“We are obviously aware of the recent sell-off in tech but in Altium’s favour is positive earnings, no capitalising of R&D, a strong growth outlook and an expected satisfying of the Rule of 50 over the short to medium term,” the broker noted.

Takeover still on the cards

Another potential kicker the broker is keeping an eye on is the possibility of a takeover bid from global leader in design and make technology, Autodesk.

Having concluded that it is in the best interests of Autodesk to acquire Altium, Bell Potter expects the US-based company to revise the initial $38.50 a share bid it made last year. 

While Altium management made it clear last year it would not consider a verbal offer, the company is expected to be considerably more interested in an offer north of $40.00.

This is unsurprising given that the stock was trading north of $45 prior to being dragged down by the tough love dished out to US-based tech stocks earlier this year.

What other brokers think

While much of the stock’s 2% ascent at the open today could attributed to Bell Potter’s upgrade, early gains quickly faded, with the share price ending the day pretty much where it started.

• Meantime, like Bell Potter, Citi is also anticipating a strong first half FY22 result. But in the anticipation of rising costs providing headwinds going into 2022, the broker has downgraded Altium to Neutral from Buy, with the target falling to $35.30 (31/01/21).

• While Macquarie currently rates Altium Underperform, with a price target of just $27.10, the broker hasn’t updated on the stock since early September 2021.

Consensus on Altium is Hold.

Based on Morningstar's fair value of $32.58, the stock looks overvalued (04/02/22).

The Altium share price has seesawed over the past year