JOLTS Job Openings (Jun) 7.44M vs 7.5M Expected
On Friday, Deutsche Bank maintained a Buy rating on Synopsys (NASDAQ:SNPS), with a steady price target of $645.00. The firm cited the company's robust quarterly performance, highlighting a 13% increase in revenue and a non-GAAP margin of 40%. This success was attributed to significant hardware sales, which constituted 29% of total revenue, and a 32% year-over-year rise in Intellectual Property (IP) revenue.
The company's yearly guidance was adjusted, with improvements to the non-GAAP margin and earnings per share (EPS), now expected to reach 38.5% and $13.09 at the mid-point, respectively. However, the revenue forecast remains unaltered. Despite Electronic Design Automation (EDA) growth being modest at 5%, it was noted that this figure comes in the wake of a challenging comparison to the 22% growth seen in the third quarter of 2024.
Synopsys reported strong performance in verification, with multiple victories in VCS that ousted competitors, while IP drawdowns were robust due to increased demand for PCIe and other interconnects from hyperscalers. The overall demand environment is described as stable with solid growth, though some uncertainty persists in China.
The conservative stance on China has been consistent throughout the first three quarters of the year, and with this quarter's downturn, Deutsche Bank views it as a potential for Synopsys to outperform expectations in the fourth quarter of 2024.
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