Altair Engineering Likely For Multiple Expansion Backed By Business Resilience, Expanding Margins, Analyst Says

Anusuya Lahiri
2 min read
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In this article:

  • Needham analyst Charles Shi maintained Altair Engineering Inc (NASDAQ: ALTR) with a Buy and raised the price target from $60 to $70.

  • Altair reported strong 4Q22 results that beat consensus and guided 1Q23, broadly in line with Shi's estimates.

  • The company, however, sees the top-line growth rate to be ~8%, which exceeded Shi's estimate of ~4%.

  • Despite the macroeconomic uncertainties, Altair's strong 2023 guidance adds to the story of a resilient business model as a design and engineering software business.

  • Management cited the discontinuation of certain product lines of acquired businesses starting in 1Q23 as part of the reason for the below-seasonal guidance.

  • Management believes Technology and Banking verticals will grow faster, but Aerospace and Automotive verticals will still grow at a decent rate.

  • Relative to Shi's concern about a slowdown in the Automotive vertical, ALTR's outlook is much better than expected.

  • ALTR's 2023 guidance implies ~20%+ EBITDA margin on a full-year basis, which is well above Shi's original expectation of ~18%.

  • ALTR set the goal of exiting 2023 with a 20% EBITDA margin on a run-rate basis. The guidance suggests that ALTR is ahead of the plan.

  • The analyst raised his 2023 estimates according to the new full-year guidance and adjusted his 2024 estimates slightly to reflect a higher 2023 base.

  • Shi saw ALTR delivering $671 million in revenue and a ~22% EBITDA margin in 2024.

  • Due to the business resiliency and the expanding margins, the analyst believed the stock might see further multiple expansion.

  • ALTR Price Action: Altair shares traded higher by 8.21% at $61.22 on the last check Friday.

  • Photo: rafapress via Shutterstock

Latest Ratings for ALTR

Date

Firm

Action

From

To

Mar 2022

Goldman Sachs

Maintains

Neutral

Nov 2021

RBC Capital

Maintains

Sector Perform

Aug 2021

RBC Capital

Maintains

Sector Perform

View More Analyst Ratings for ALTR

View the Latest Analyst Ratings

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This article Altair Engineering Likely For Multiple Expansion Backed By Business Resilience, Expanding Margins, Analyst Says originally appeared on Benzinga.com

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