Where will the Altium share price be in 2025?

James Mickleboro|February 25, 2020 6:00pm|More on:ALU

TheAltium Limited(ASX: ALU)share price has come under pressure in February.

Since peaking at an all-time high of $42.47 in the middle of the month, the design software company’s shares had fallen as much as 28% to $30.54 this morning.

Why is the Altium share price sinking lower in February?

Investors have been hitting the sell button in a panic this month following the release of its half year results.

Although Altium delivered further strong growth in the first half, its guidance for the full year underwhelmed.

Due to the underperformance of its Octopart business and the impact of the coronavirus outbreak, management only expects to hit the low end of its full year revenue guidance range of US$205 million to US$215 million.

Unfortunately, the market has become accustomed to Altium smashing its guidance and appeared to have positioned itself for a guidance upgrade ahead of its results release. Therefore, when one didn’t come, there was only going to be one outcome.

Is this a buying opportunity?

When the market volatility eases, I believe it would be worth considering a long-term investment in Altium’s shares.

After all, the issues impacting its business today are only short term headwinds and management remains confident on its 2025 targets.

Last week Altium’s CEO, Aram Mirkazemi, said: “There is no doubt that Altium has growing momentum toward market dominance and our 2025 targets. Our increase in new Altium Designer seats of 19% and record growth of 16% in our subscription base to 46,693 subscribers puts us well into our climb to reach 100,000 subscribers by 2025. I am confident that we will achieve our target of 50,000 subscribers by full year.”

This is expected to lead to Altium generating revenue of US$500 million, which is 144% higher than the low end of its guidance range for FY 2020.

I believe it has a very strong chance of succeeding with this goal thanks to its high quality software and favourable industry tailwinds. After which, with the Internet of Things market (a key driver of demand for its software) showing no signs of slowing any time soon, I expect its solid growth to continue for many more years to come.

In light of this, I am confident that in 2025 the Altium share price will be trading materially higher than where it stands today. This could make it worth considering a long-term investment in its shares and those of fellow tech starsAfterpay Ltd(ASX: APT)andAppen Ltd(ASX: APX).