Shares of Synopsys Inc. (SNPS) hit a new 52-week high of $39.43 on Dec 18, eventually closing at $39.42. The shares have been particularly buoyant in recent times, jumping 10.4% over the past one month. The closing share price also represents a decent one-year return of 23.2% and a year-to-date return of 22.1%.
The price increase was supported by a significant rise in share volume. Average volume of shares traded over the last 10 days (1,040k) increased substantially from the 610k average volume of shares traded over the last three months.
This price appreciation can be attributed to the deployment of its Design Compiler Graphical products for Samsung mobile system on chips (SoCs). The Design Compiler Graphical is intended to reduce power consumption and provide more competitive SoCs for the mobile market.
It is also worth noting that the share price has been increasing continuously since the company reported fourth-quarter results on Dec 4. Synopsys delivered mixed fiscal fourth-quarter 2013 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same. Moreover, both top and bottom lines compared favorably on a year-over-year basis. The year-over-year increase was primarily attributed to revenues from backlog.
Its collaboration with ARM to optimize the performance of its processors was another positive for the company. Alliances have helped the company strengthen its product portfolio and improved the design of its custom integrated circuits, which in turn boosted sales.
We are positive that the company’s recent product launches, acquisitions and deal wins will boost results, going forward. Moreover, the unique intellectual properties and global support provided by Synopsys will likely drive forthcoming results. The company has a good cash reserve that is necessary for funding further acquisitions.
However, competition from Adobe Systems (ADBE), Advent Software (ADVS) and Ansys Inc. coupled with a challenging technology spending environment and uncertainty regarding proper time to realize acquisition synergies keep us on the sidelines.
Currently, Synopsys holds a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector is Micron Technology Inc. (MU), with a Zacks Rank #1 (Strong Buy).