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Technology
PATRICK SEITZ

Synopsys Surges After Topping Targets, Guiding Well Above Views

Shares of Synopsys soared Thursday after the maker of semiconductor design software handily beat analyst estimates for its fiscal second quarter. SNPS stock also got a lift after it raised its outlook for the current quarter and full fiscal year.

Thanks to robust semiconductor and electronics market demand, the Mountain View, Calif.-based company reported late Wednesday that it earned an adjusted $2.50 a share on sales of $1.28 billion in the quarter ended April 30. Analysts polled by FactSet expected Synopsys to earn $2.37 a share on sales of $1.26 billion. On a year-over-year basis, Synopsys earnings jumped 47% while sales climbed 25%.

For the current quarter ending July 31, Synopsys predicted adjusted earnings of $2.04 a share on sales of $1.225 billion. That's based on the midpoint of its guidance. Analysts were looking for fiscal third-quarter earnings of $1.61 a share on sales of $1.137 billion, according to FactSet.

For the full fiscal year ending Oct. 31, Synopsys guided to adjusted earnings of $8.67 a share on sales of $5.025 billion. Wall Street had estimated earnings of $7.91 a share on sales of $4.813 billion.

SNPS Stock Rises After Report

On the stock market today, SNPS stock surged 10.2% to close at 300.52.

"Synopsys delivered an outstanding fiscal second quarter, exceeding our guidance targets with strength across all product groups and geographies," Chief Executive Aart de Geus said in a news release. "Based on strong first half execution and confidence in our business, we are raising our full-year targets substantially."

He added, "For fiscal 2022, we expect to grow annual revenue approximately 20% and pass the $5 billion milestone, drive further operating margin expansion, grow earnings per share by more than 25%, and generate approximately $1.6 billion in operating cash flow."

Electronic design automation stocks like Synopsys look like a safe place to hide in a bear market, Needham analyst Charles Shi said in a note to clients. He reiterated his buy rating on SNPS stock and raised his price target to 380 from 370.

SNPS Stock Is Long-Term Leader

Since its last earnings report three months ago, Synopsys has announced a joint venture and an acquisition.

On April 4, Synopsys and Juniper Networks disclosed they had formed a separate company to pursue the fast-growing silicon photonics market. The new company will provide an open silicon photonics platform for telecom, data communications, lidar, high-performance computing and other applications.

On April 27, Synopsys announced a deal to buy WhiteHat Security, a leading provider of application security software-as-a-service, for $330 million in cash.

SNPS stock ranks second out of 12 stocks in IBD's Computer Software-Design industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 84 out of 99. The Composite Rating scores a stock's key growth metrics against all other stocks regardless of industry group.

SNPS stock is in the IBD Long-Term Leaders Portfolio.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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