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

Needham analyst Charles Shi maintained Altair Engineering Inc 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.
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