Synopsys Finishes Its Fiscal Year on a High Note; Increasing Fair Value Estimate to $382

Narrow-moat Synopsys reported strong fourth-quarter results, with revenue and adjusted EPS exceeding both management’s and our at-consensus expectations. Despite macroeconomic uncertainty surrounding export controls and a looming recession, management confidently laid out solid targets for fiscal 2023, which align with their long-term financial objectives. Synopsys finished its fiscal year reaching all financial goals as the company continues to benefit from secular trends toward hyperscale computing, artificial intelligence, or AI, and 5G communications. We expect Synopsys’ solutions to continue to gain broad-based relevance as demand for higher complexity, tighter integration and security in chips magnifies throughout industries. As we roll our model forward a year, we are raising our fair value estimate to $382 from $343 per share. With after-hours shares trading around $360, we view the shares as fairly valued.