On Aug 21, 2014, shares of Synopsys Inc. (SNPS) scaled a 52-week high of $41.82 buoyed by a solid third-quarter earnings beat. Shares closed at $41.75 gaining 6.23% during intra-day trading. The current closing price represents a 1-year return of 13.39% and year-to-date return of 3.29%.
In the third quarter of 2014, Synopsys’ top and bottom line figures improved on a year-over-year basis. Revenues were positively impacted by higher adoption of Synopsys’ products and the Coverity acquisition. Also, the company expects Coverity to be accretive in fiscal 2016.
The company’s margin expanded due to operational efficiency and cost control. It is worth mentioning that during the quarter, Synopsys collaborated with Intel Corp. (INTC) to facilitate the adoption of Intel's 14-nanometer (nm) Tri-Gate process technology by Intel Custom Foundry customers.
Synopsys also provided an encouraging revenue guidance range of $537.0–$547.0 million for the fourth quarter, up from $505 million reported in the year-ago comparable quarter. Management expects non-GAAP earnings per share in the range of 59–69 cents, higher than the 50 cents reported in the year-ago quarter.
We believe the company’s recent product launches, acquisitions and deal wins will boost results, going ahead. Moreover, unique intellectual properties and global support provided by the company will likely drive its forthcoming results. Additionally, the Coverity acquisition will expand Synopsys’ reach in the software quality, testing and security tools market.
However, competition from Cadence Design Systems Inc. (CDNS) and Mentor Graphics Corp. (MENT) coupled with a challenging technology spending environment and uncertainty regarding proper time to realize acquisition synergies keep us on the sidelines.
Currently, Synopsys has a Zacks Rank #3 (Hold).