Synopsys SNPS is the foundation of innovation in our world today. Every electronic device on earth today is powered by an integrated circuit or chip of some sort. Synopsys is the driving force for chip design and controls the electronic design automation (EDA) market.
SNPS is a safe way to invest in the overly cyclical semiconductor space, due to the company’s diverse portfolio of lucrative products. Three company is split up into 3 segments: EDA, IP, and software integration. 60% of Synopsys’s topline is driven by its EDA products, which guide chip designers from initial design to validation. The EDA market was worth almost $7 billion in 2018 and is expected to grow by nearly 8% annually for the next 5 years, according to IBS data.
Its IP products provide customers with ready to use chip designs that are proven, saving customers time. It is the 2nd largest global player in this $4.5 billion market, according to IBS’s 2018 data. Synopsys’s massive IP portfolio and over 15 years of investments give them a firm grip on this market.
Synopsys also offers products that improve software developers’ code, ensuring that there are no code defects and verifying that the code is secure. Its software integration revenue only makes up 10% of the topline but is the fastest-growing segment at healthy double-digit growth levels.
5G infrastructure is just being put in place, and the world’s largest tech companies are preparing their turnkey solutions for the massive demand this improved infrastructure will spur. Synopsys is at the foundation of new technology and will ride this 5G wave.
Synopsys illustrated free-cash-flows of roughly $600 million, $730 million in cash, and minimal amounts of debt on the balance sheet giving this company a large amount of financial flexibility to continue acquiring in its fragmented markets.
These shares have appreciated over 60% so far this year, currently riding its 50-day moving average and I am confident SNPS can bust through this level with 8/8 analysts calling this a buy right now.
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Synopsys, Inc. (SNPS) : Free Stock Analysis Report
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