On Tuesday, Oppenheimer maintained its positive stance on Altair Engineering (NASDAQ: ALTR), reiterating an Outperform rating and a $100.00 price target. The firm's position comes amid market movements prompted by reports that Altair is considering expressions of takeover interest. The company's stock has seen an uptick following the news.
According to Oppenheimer, strategic buyers are more probable suitors than financial entities. The firm points to Electronic Design Automation (EDA) leader Cadence Design Systems (NASDAQ: NASDAQ:CDNS) as a potential acquirer, suggesting this could be a strategic move in response to Synopsys' (NASDAQ: NASDAQ:SNPS) recent acquisition of ANSYS. Other possible contenders include industrial design companies such as Autodesk (NASDAQ: NASDAQ:ADSK), Dassault Systèmes (EPA: DSY), and multi-industrials like Siemens (ETR: SIE), Honeywell (NASDAQ: NASDAQ:HON), and General Electric (NYSE: NYSE:GE), all of which have previously shown interest in expanding their software portfolios.
Oppenheimer notes that, compared to ANSYS' offerings, Altair's product lineup may not offer immediate synergies for an EDA vendor due to its lesser focus on semiconductors and technology sectors. However, the analyst points out that Altair's shares are currently trading above the levels seen in the ANSYS transaction.
Speculation regarding the potential acquisition price suggests that while a mid-teens enterprise value to sales multiple may represent a ceiling, based on comparisons to deals involving IOT and Guidewire Software (NYSE: NYSE:GWRE), a more realistic premium would be in the range of 10-15%. This would place the acquisition price for Altair between $105 and $110 per share, benefiting from the positive market sentiment following the ANSYS-Synopsys deal.
In other recent news, Altair Engineering Inc. reported a significant increase in Q2 2024 earnings, with total revenue reaching $148.8 million and software revenue hitting $135.4 million, marking a 10.6% year-over-year increase. The growth was primarily driven by a strong performance in the aerospace and defense sector and the release of enhanced AI capabilities in Altair HyperWorks 2024. In addition, Altair expanded its reach with the acquisition of Metrics Design Automation, contributing to its simulation-as-a-service offerings.
Moreover, Altair, in collaboration with the Technical University of Munich, made a breakthrough in quantum computing, particularly in computational fluid dynamics (CFD). This advancement could significantly increase the model size and scalability of CFD simulations compared to classical computing methods.
Furthermore, Altair expressed gratitude for the ongoing support from Matrix Capital Management, which decided to maintain its full investment position in the company. Analysts from Gartner (NYSE:IT) recognized Altair's leadership in data science and machine learning, reinforcing the company's position in the computational intelligence landscape.
InvestingPro Insights
Recent InvestingPro data provides additional context to Oppenheimer's analysis of Altair Engineering (NASDAQ: ALTR). The company's market capitalization stands at $8.68 billion, with a price-to-earnings ratio of 312.83, reflecting high investor expectations. Altair's revenue for the last twelve months as of Q2 2024 was $627.21 million, with a modest growth rate of 6.85%. The company maintains a strong gross profit margin of 80.92%, indicating efficient cost management.
InvestingPro Tips highlight Altair's strengths and potential challenges. One tip notes that Altair's stock price has outperformed the S&P 500 in the past year, aligning with the 55.68% one-year price total return reported. Another tip suggests that while the company is profitable, its earnings per share growth has been volatile recently, which could be a consideration for potential acquirers.
These insights complement Oppenheimer's analysis, providing a financial backdrop to the acquisition speculation. Investors considering Altair's potential as an acquisition target may find these metrics valuable in assessing the company's current market position and financial health.
For a more comprehensive analysis, InvestingPro offers 13 additional tips for Altair Engineering, providing a deeper understanding of the company's financial situation and market performance.
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