Synopsys, Inc. (NASDAQ: NASDAQ:SNPS), a leading provider of software products and services for the semiconductor industry, maintained its positive outlook with Rosenblatt standing firm on a Buy rating and a $635.00 price target for the company's shares.
The endorsement follows the company's third-quarter earnings report, which displayed a modest revenue increase and exceeded earnings expectations.
In the recent quarter, Synopsys reported revenues of $1,525.7 million, a 2.6% rise, aligning with the midpoint of its third-quarter guidance, excluding contributions from the SIG (LON:SHI) division. The company's performance slightly surpassed the projected $1,521 million, attributed to robust demand across several product lines.
Notably, revenue from upfront deals, which include IP and hardware, surged by 48.5% year-over-year, with Design IP experiencing a 32.2% increase. This growth is largely driven by the expansion of AI-accelerator products by hyperscalers and continued strength in the automotive sector.
Synopsys also reported a non-GAAP EPS of $3.43 for the third quarter, outperforming the anticipated $3.29. Operating expenses matched expectations, indicating efficient management of the company's financials during the period.
The company's success in the quarter is partially due to the expansion of core Electronic Design Automation (EDA) subscriptions and the integration of AI-driven optimization products, which have contributed to the firm's revenue growth.
Looking ahead, Synopsys has adjusted its full-year 2024 revenue guidance upward to a 5% increase for Continuing Operations, notwithstanding the pending sale of its SIG division expected to finalize by the end of the year.
The company also forecasts operating margins to hover around 38.5%. In light of these post-quarter developments, Rosenblatt has slightly raised its forecast while maintaining the previous price target for Synopsys shares.
In other recent news, Synopsys has reported a successful third quarter, with earnings and revenue surpassing analyst expectations. The company posted an adjusted earnings per share of $3.43, exceeding the analyst estimate of $3.28, and a 13% year-over-year revenue increase to a record $1.53 billion.
Analyst firms KeyBanc, Morgan Stanley (NYSE:MS), Piper Sandler, and JPMorgan (NYSE:JPM) have all maintained their Overweight ratings on Synopsys. Notably, Piper Sandler and JPMorgan have raised their price targets to $687 and $685 respectively.
Synopsys management expressed confidence about the potential effects of layoffs at Intel (NASDAQ:INTC), indicating that there would be no near-term impact. The company's third-quarter backlog valued at $7.9 billion remained consistent quarter over quarter. Furthermore, Synopsys has decided to keep its midpoint revenue guidance for the fiscal year 2024 unchanged.
In terms of future expectations, there has been a slight revision in the earnings per share (EPS) estimates for fiscal years 2025 and 2026, now set at $14.75 and $17.08, down from the prior estimates of $15.60 and $17.95, respectively.
InvestingPro Insights
As Synopsys, Inc. (NASDAQ:SNPS) garners a positive outlook from industry analysts, InvestingPro data further enriches the narrative of the company's financial health and market position. The company boasts an impressive gross profit margin of 80.5% in the last twelve months as of Q3 2024, highlighting its efficiency and command over operational costs. This is complemented by a robust revenue growth of 23.08% during the same period, signaling strong demand for its products in the semiconductor space.
InvestingPro Tips indicate that Synopsys is trading at a high earnings multiple, with a P/E ratio of 56.67 and an adjusted P/E ratio of 55.65. This suggests a premium market valuation, reflecting investor confidence in the company's future earnings potential. Additionally, the company's liquid assets exceed its short-term obligations, providing financial flexibility and stability.
For investors seeking more nuanced analysis, InvestingPro offers additional tips on Synopsys, including insights on the company's valuation multiples and its position within the software industry. With 15 more InvestingPro Tips available, investors can access a deeper level of analysis to inform their investment decisions. To explore these insights, visit https://www.investing.com/pro/SNPS.
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