Synopsys Remains Confident in Broad-Based Demand Fueling Future Growth; Maintain $382 FVE

Narrow-moat Synopsys reported solid first-quarter results which came in above management and our at-consensus expectations for revenue and adjusted EPS. Despite a choppy macroenvironment involving reduced semiconductor industry growth and a looming recession, management reaffirmed its full-year guidance, as well as increasing its adjusted EPS target range. Synopsys remains confident in long-term demand from end-markets, as the company continues to benefit from secular tailwinds toward hyperscale computing, artificial intelligence, or AI, and 5G communications. We expect Synopsys’ solutions to continue to gain broad-based significance as demand for higher complexity, and tighter integration and security in chips perpetuates throughout industries. We are maintaining our $382 fair value estimate, and with afterhours shares trading around $365, we view shares as fairly valued.