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On Thursday, Piper Sandler maintained its positive stance on Synopsys, Inc. (NASDAQ:SNPS) stock, reiterating an Overweight rating and a price target of $687.00.
The firm highlighted the company's raised profitability guidance for fiscal year 2024, with expected EBIT margins to reach 38.5%, a 40 basis points increase. This adjustment reflects higher incremental margins, now anticipated to be 53% compared to the previous 50%.
Synopsys has reported a 35% year-to-date growth in its Intellectual Property (IP) business, leading to an impressive 44% operating margin within this segment.
Despite a challenging comparison from the previous year, the Design Automation division achieved a 6% year-over-year growth. Moreover, the company's overall backlog has seen a significant reacceleration, growing over 20% to $7.9 billion, up from $6.5 billion in the base period.
The firm expressed optimism regarding Synopsys's margin trajectory, which is supported by strong performance in the IP business. The analyst anticipates that the company is on a rapid path to achieving EBIT margins of over 40% and possibly exceeding that threshold in the future.
In conclusion, Piper Sandler reaffirmed its confidence in Synopsys's financial prospects, stating that the margin improvements and backlog growth could lead to potential upside beyond the current $687 price target. The firm's stance remains unchanged, with a continued Overweight rating on the stock.
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.
Revenue also increased by 13% year-over-year to a record $1.53 billion, slightly above the consensus expectation of $1.52 billion. Driven by strong execution and business momentum, Synopsys anticipates full-year revenue growth of approximately 15%.
Morgan Stanley continues to maintain its Overweight rating on Synopsys, highlighting the company's solid quarterly performance and momentum in its core EDA business. Similarly, JPMorgan has raised its price target for Synopsys to $685 from the previous $655, maintaining an Overweight rating.
No significant details were disclosed regarding the ongoing merger discussions with Ansys (NASDAQ:ANSS). However, the update indicated that Synopsys' current financial results are robust, excluding the soon-to-be-sold software integrity division. These are recent developments in Synopsys' operations and financial performance.
InvestingPro Insights
As Synopsys, Inc. (NASDAQ:SNPS) garners a positive outlook from Piper Sandler, the company's financial health and market performance further underline its potential. According to InvestingPro data, Synopsys boasts a robust market capitalization of $86.52 billion, underscoring its significant presence in the market. The company's Gross Profit Margin for the last twelve months as of Q2 2024 impressively stands at 80.39%, reflecting its efficient cost management and strong pricing power. Additionally, the Revenue Growth over the same period has been recorded at 25.53%, indicating a solid expansion in its business operations.
These figures are complemented by InvestingPro Tips, which reveal that Synopsys operates with a moderate level of debt and that its liquid assets exceed its short-term obligations, suggesting a healthy balance sheet. Moreover, analysts predict the company will remain profitable this year, a continuation of its profitability over the last twelve months. For investors looking for more in-depth analysis, InvestingPro offers a total of 15 tips for Synopsys, including insights into valuation multiples and profitability metrics.
The company's financial strength, as highlighted by its impressive gross profit margins and sustained revenue growth, aligns with the optimism expressed by Piper Sandler. These factors, combined with the company's strategic position in the software industry, could indeed contribute to potential upside beyond the current price target. For those interested in exploring further, additional InvestingPro Tips can be found at: https://www.investing.com/pro/SNPS.
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