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Altair: There's Nowhere To Go But Down

Mar. 01, 2021 8:15 AM ETAltair Engineering Inc. (ALTR)4 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of Altair rallied ~7% after reporting fourth quarter results.
  • Despite beating Wall Street's expectations, Altair's growth prospects and execution hardly justify the ~2x rally the stock has seen over the past year.
  • Altair's outlook for 2021 calls for just 8% y/y growth. Against this revenue view, Altair's current valuation multiple sits at nearly 9x forward revenue.
  • For a legacy technology company with few notable growth drivers on the horizon, it's difficult to see the Altair rally continuing.
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With the rout in tech stocks over the past week, investors have gotten an opportunity to examine their portfolios and hopefully weed out low-quality names that are at risk of a correction. During the years-long bull market for technology stocks, stocks have rallied almost indiscriminately, where basically any software company that wasn't facing any immediate or major problems has seen a major rally.

But some of these stocks truly have very little to show against the massive valuations they have amassed. Altair Engineering (NASDAQ:ALTR) is a prime example of one of these companies. Founded in 1985, Altair enjoyed its heyday as one of the premier provider of CAD (computer-aided design) software. But after years atop its saturated market, it's unclear whether Altair has much room for growth left in front of it.

It's worth noting that not all legacy software companies have met a similar fate. Adobe (ADBE) is also a four-decade-old company, and yet the company has managed to maintain ~20% y/y growth and continually justify its premium valuation multiple by expanding its product portfolio, converting its user base to cloud applications, and continually staying on top of its market. Microsoft (MSFT) is yet another example of a "legacy" technology company that has rebuilt its brand around the cloud and rolled out a host of new business lines that kept the company relevant in 2021.

We can hardly say the same for Altair, however - and the company's story each and every quarter seems to be that the business is just plodding along.

Take a look at Altair's guidance for next year:

Figure 1. Altair FY21 outlookSource: Altair Q4 earnings release

Altair is calling for between $502-$510 million in total revenue for next year, which would represent just meager 8% y/y growth at the midpoint.

Meanwhile, its

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This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

bluescorpion0 profile picture
The author has been obviously wrong. at 61 he said "There's Nowhere To Go But Down" but its 79 now.
As aeronautical engineer, i use its softwate and i have to say that it is the standar in the aerospatial industry
MWinMD profile picture
"Against the midpoint of the company's $502-$510 million forward revenue range, Altair trades at a rich 8.9x EV/FY21 revenue.

I guess it all depends on how big you think 3D printing will get (and how soon). This other SA article cites a similar EV/Sales ratio (~10) as why most of the 3D printing stocks in the PRNT ETF are cheap!


It's a hard call when to jump into these stocks. I feel like I missed the big runup recently, but there's also been a sizable fallback from the recent peaks. So I'm nibbling at PRLB and SSYS today.
sam026 profile picture
Interesting point of view that a mature company's 8% annual growth rate is to be considered defective.
I would point out that Altair's product is not a CAD (Computer Aided Design) software; it is a suite of CAE (Computer Aided Engineering) products. CAD is the software that documents a design (think of product to computerize drafting room functions.) Where as CAE products helps engineers confirm the products' suitable to function (think of software to virtually test the product's ability to do the job, i.e. the design won't fail).
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