Altium Limited is an Australian based company engaged in the development and sales of computer software for the design of electronic products. Its products are Altium design software license, Altium design subscription, Tasking Software licenses, Tasking Maintenance, service revenue, service advertising, and other. Altium designer offers native 3D PCB computer-aid design. Its segment are Board and Systems, which is the major revenue driver for the company. Microcontrollers and Embedded Systems, Electronic Parts, Search and Discovery business and Corporate.
In our last analysis of Altium back in 2021, SP had recovered 66% after Covid crash reaching its SP peak in October 2020, together with a lots of other technology stocks, that were trading 33% below its peak, reaching $24 which has putted the SP at the same price range of Covid crash while we have done our trade of 40% from that particular trade.
✅ (ASX: ALU) has once again bounced back from its $24 support level.
The fundamentals of the company is now even stronger than during COVID, with solid revenue, cash flow and EBITDA improvement during H1FY2022.
In 2021, Altium has also showed gaining strong early adoption regarding the product Altium 365, which the company claims to be the the world’s first digital platform for design and realization of electronics hardware, mostly importantly pinpointing a strong recurring revenue of 80%. These strong metrics are showed on the picture below.
The picture below taken from half year report also shows the company projection into the next 4 years.
Key Metrics that have remarkably improved in H1FY2022 and could support the stock price above our proposed Target
✅ EBITDA margins increased 29% to 34.80 from 27 H1 FY2022.
✅ Revenue increased by 28% H1 FY2022
✅ Earnings also has increased over 37% in H1 FY2022 from the year before.
✅ Strong cash flow boost as result of increased revenue.
✅ The whole Technology sector is currently down, providing also a great opportunity to enter into a stock which the sector is trading at discounted value.
✅ SP is currently trading under SMA, also confirming the stock is relatively cheap trading at the same levels of COVID crash.
✅ Having the money invested on a stock that has strong fundamentals is a peace of mind even if a further SP deterioration occurs on the short term in this bear market.
✅ Bullish intersection level 2 has confirmed with green Heiken Ashi candle and larger volume on the upside, while bullish intersection level 1 is still to be confirmed.
✅ Potential for bullish intersection level 1 to occur on incoming days.
✅ Same technical formation of our last trade with better projected EBITDA for FY2022
ENTRY DETAILS AND TARGETS (VIP MEMBERS ACCESS REQUIRED
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Strategy: BGS 20 Strategy
Buying under: $28 OR UNDER for medium term holders. Buy at the support $24-$25 for short term traders.
*As mentioned before, ALU offers great entry opportunity for long term holders under $28 provided that H2FY2022 is in line with H1FY2022, which is likely to be the case.
Lead time: will depend on the sector (1 months to 3 months), most likely after FY2022 report.
Stop loss: Consider any price under the bottom of the support range: $23.5
Note the market is still bearish, although investors and traders want to enter at the bottom prices rather than at the top, it is important to be mindful that markets downturn is likely to continue with the next interest rate hikes. We could see ALU trading around the support level ($24-$25) again if market falls harder again prior next FED meeting.
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