Company Reports

We maintained our $480 fair value estimate for narrow-moat Synopsys after the firm posted fiscal second-quarter results with revenue below our expectations, while the non-GAAP operating margin was above our estimate. In the quarter, Synopsys entered into a definitive agreement to sell its software integrity business to Clearlake Capital for over $2.1 billion, which we view as strategically sound. With this, management adjusted its full-year guidance for removing the segment and still expects strong performance throughout the year. In our view, Synopsys is executing well on deploying its artificial intelligence applications across customer workflows, which we think will be the key ingredient in propelling chip design productivity. We continue to view shares, which were flat after-hours, as overvalued.

We maintain our $480 fair value estimate for narrow-moat Synopsys after the firm reported fiscal first-quarter results, which were largely in line with our revenue estimates while exceeding our expectations for non-GAAP operating margin. We are impressed by Synopsys’ deployment of its artificial intelligence toolkit across customer workflows, which we think will propel chip design productivity as Moore’s law slows. Management maintained its fiscal 2024 outlook for revenue and margins while increasing its non-GAAP EPS guidance. We remain confident in Synopsys’ long-term demand as the firm capitalizes on secular trends toward hyperscale computing, AI, and 5G communications. We believe its pending acquisition of Ansys will deliver ample growth opportunities. We view the shares, which were up around 4% after hours, as overvalued.

Synopsys provides electronic design automation, or EDA, software, intellectual property, and software integrity products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

On Jan. 16, narrow-moat Synopsys announced that it entered into a definitive agreement to acquire wide-moat Ansys, a deal initially reported upon in late December, in a cash and stock deal for an enterprise value of approximately $35 billion or total consideration of $390 per share (based on stock prices as of Dec. 21 before initial reports of this acquisition surfaced). For Synopsys, we’re a bit more comfortable with the deal price, as early reports suggested that the bids for Ansys were “well in excess of $400 per share.” Based on these terms, we view the Ansys acquisition as neutral to our Synopsys fair value estimate, which is unchanged at $480 per share.

On Dec. 22, shares of narrow-moat Synopsys fell 6% as The Wall Street Journal reported, citing unnamed sources, that the company is in talks to acquire wide-moat Ansys. A subsequent Reuters sources report suggested that Ansys is receiving acquisition offers at “well over $400 per share,” which appears rather high to us compared with our $262 fair value estimate for Ansys and, in our opinion, explains the selloff in Synopsys’ shares. We maintain our $480 fair value estimate for Synopsys but may adjust our valuation when more information arises, or further actions take place.

Synopsys provides electronic design automation, or EDA, software, intellectual property, and software integrity products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Narrow-moat Synopsys reported strong fiscal fourth-quarter results, with revenue and profitability exceeding our expectations. We are impressed by the company's advancement of its artificial intelligence toolkit, which we think will ultimately propel the productivity of complex chip design. Management provided a solid fiscal 2024 outlook, including strong first-quarter guidance. Despite macroeconomic headwinds, we are confident of long-term demand as Synopsys capitalizes on secular trends toward hyperscale computing, AI, and 5G communications. We are raising our fair value estimate to $480 per share from $420. We view the shares, which were up around 2% after hours, as overvalued.

Narrow-moat Synopsys reported strong fiscal third-quarter results, with revenue meeting our above-consensus expectations and adjusted EPS surpassing both our and management’s expectations. We are also impressed with the company’s position in artificial intelligence, or AI. We are raising our fair value estimate to $420 per share from $382, but with shares trading up to $438 after hours, we still view the stock as slightly overvalued.

Synopsys provides electronic design automation, or EDA, software, intellectual property, and software integrity products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Synopsys provides electronic design automation, or EDA, software, intellectual property, and software integrity products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Narrow-moat Synopsys reported solid second-quarter results that came in slightly below our revenue expectations, however, they were above our non-GAAP EPS expectations. Despite a tough macroenvironment involving a weaker semiconductor market, management is confident in future wins stemming from the firm’s customers prioritizing research and development in chip design for when demand ramps up again. With this in mind, management raised its full-year guidance, as well as guiding to a sequentially stronger third quarter. Synopsys remains confident in long-term demand as the company capitalizes on the secular push toward hyperscale computing, artificial intelligence, and 5G communications. We expect Synopsys’ solutions to continue to gain broad-based adoption as demand for higher complexity, tighter integration, and security in chips increases across industries. We are maintaining our $382 fair value estimate, and with afterhours shares trading around $384, we view shares as fairly valued.

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.

Synopsys provides electronic design automation, or EDA, software, intellectual property, and software integrity products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

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.

Narrow-moat Synopsys reported strong third-quarter results, with revenue and adjusted EPS surpassing both management’s and our at-consensus expectations. The firm raised its fiscal 2022 outlook, reflecting the intensified demand environment as consumer and business applications require both higher chip content and complexity. We expect Synopsys to continue to benefit from the increasing reliance on automation in design flows, and therefore raise our fair value estimate to $343 per share from $334. Like many other companies in the sector, Synopsys has enjoyed a bounce back in share price following the software selloff earlier in the year, however, with shares trading around $384 after-hours, we view the shares as overvalued.

Synopsys provides electronic design automation, or EDA, software, intellectual property, and software integrity products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Synopsys provides electronic design automation, or EDA, software, intellectual property, and software integrity products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Narrow-moat Synopsys reported strong second-quarter results, with the top and bottom line exceeding both management’s and our at-consensus expectations. The firm significantly raised its full-year outlook for fiscal 2022, reflecting an outsize demand environment as consumer and business applications require both more chips and increasingly complex chips. We expect Synopsys to benefit from the increasing reliance on automation in design flows, with the firm’s DSO.ai solution finding increasing success within large customers, and enabling powerful cross-selling opportunities with the firm’s Fusion Design Platform.

Synopsys provides electronic design automation (EDA) software, intellectual property (IP), and software integrity (SI) products that are critical to the semiconductor chip design process. We expect that as secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, Synopsys will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Synopsys has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

On April 4 narrow-moat Synopsys announced a joint investment with no-moat Juniper Networks into a new, separate company, in which Synopsys will be the majority owner. The yet-to-be-named new company (NewCo) will provide an open silicon photonics platform that enables lower-cost lower-power silicon photonics integration for chip designs through a process design kit, or PDK. Juniper is reported to contribute integrated silicon photonics assets, including 200-plus photonic device design and process integration patents. Synopsys’ current capabilities in silicon photonics are delivered through its unified electronic photonic design automation solution. We believe the joint investment will enable NewCo to accelerate Synopsys’ pre-existing photonics capabilities, and breed a leading EDA tool for high-performance photonic integrated circuits, or PICs. While silicon photonics is a nascent opportunity, we expect the technology to become increasingly influential as data transmission requirements accelerate.