Why this broker just upgraded Altium (ASX:ALU) shares to a buy rating

Altium shares could be in the buy zone according to this broker…

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Key points

  • The Altium share price is rising on Tuesday
  • Investors have been buying this tech share thanks to a broker note out of Bell Potter
  • The broker believes the Altium share price is good value at the current level

The Altium Limited (ASX: ALU) share price has been a positive performer on Tuesday.

In morning trade, the electronic design software company's shares are up over 2% to $35.26.

Why is the Altium share price rising today?

The catalyst for the rise in the Altium share price on Tuesday appears to be a broker note out of Bell Potter.

According to the note, the broker has upgraded the company's shares to a buy rating with a trimmed price target of $40.00.

Based on the current Altium share price, this implies potential upside of over 13% for investors over the next 12 months.

What did the broker say?

Bell Potter is expecting a strong result from Altium in FY 2022. In fact, it believes the company could outperform its full year guidance.

The broker explained: "There is no change in our forecasts for Altium which we last updated in early November. We continue to forecast FY22 revenue and EBITDA of US$218m and US$80m which is at the top end or slightly higher than the guidance ranges of US$209-217m and US$72-80m."

As for the first half, Bell Potter expects Altium to report revenue and EBITDA growth of 24% and 29%, respectively, later this month.

An attractive tech share

While tech shares have fallen out of favour with investors this year, Bell Potter believes Altium remains a quality pick.

It commented: "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."

All in all, this could make the Altium share price good value at the current level according to Bell Potter.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Altium. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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