Synopsys (SNPS): Path To 27% Operating Margins - RBC

October 19, 2016 12:23 PM EDT
Get Alerts SNPS Hot Sheet
Price: $60.77 --0%

Rating Summary:
    4 Buy, 2 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 13 | New: 9
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RBC Capital analyst, Mitch Steves, reiterated his Outperform rating on shares of Synopsys (NASDAQ: SNPS)

The analyst thinks Synopsys should deliver operating margins of 23-24% for CY16 while Cadence is expected to deliver margins of ~26%. There appears to be a disconnect until you adjust for the Software Integrity business. The analyst estimates that the software integrity is losing ~$8M a year today, diluting EPS by a nickel. However, if you strip this business out core Synopsys margins are at 25.2%.

The analyst stated " we think Synopsys has a clear path to sustainable margins of 25%+ and would not be surprised to see numbers work to 26-27% (long-term) if software integrity sees revenue leverage and Semiconductor IP margins expand".

No change to the price target of $66.

For an analyst ratings summary and ratings history on Synopsys click here. For more ratings news on Synopsys click here.

Shares of Synopsys closed at $59.62 yesterday.

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