Goldman Sachs Downgrades Altair Engineering (ALTR) to Sell
Goldman Sachs analyst Kash Rangan downgraded Altair Engineering (NASDAQ: ALTR) from Neutral to Sell with a price target of $71.00 (from $85.00).
The analyst comments "Following Altair’s F2Q24 print, we change our rating to Sell (from Neutral), and reduce our Price Target to $71 (from $85) - with our new price target implying 17% downside, versus ~24% upside for the rest of our coverage. Altair delivered an in-line quarter, highlighted by Software Product Revenue ($135MM) growing 10.6% (constant currency), outpacing guidance of ~8%, Total Revenue outperforming Consensus (FactSet) by ~1%, and slight misses on both Non-GAAP Operating Margins and Free Cash Flow Margins (~100bps each, respectively). While remaining constructive on Altair’s fundamental profile, strong positioning within the Simulation landscape, GTM verticalization success, and defensive growth profile versus broader software (especially against a more challenging backdrop), we think future upside relative to the stock's current levels could prove limited. Namely, we highlight Altair's LTM (+18%) as having notably outpaced our broader coverage (+2%) and selected Engineering Software peers (+10%). This outperformance has come despite Altair's more modest 'Rule Of' profile (NTM: 31%, GSe), which ranks in the bottom tercile of our broader coverage (Average: 35%) and lags the Engineering Software peer set (Average: 38%). Despite this, Altair has continued to garner notable premiums on both an EV / Sales and EV / FCF basis. As we expect limited upside versus near-term estimates for revenue and profitability, we believe it prudent to update our view on the stock (while remaining constructive on the company). We look for clear and persistent signals that Altair can meaningfully re-accelerate growth, helping support a more robust 'Rule Of' profile, amongst other factors, before becoming incrementally constructive."
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Shares of Altair Engineering closed at $85.32 yesterday.