Synopsys (SNPS): Path To 27% Operating Margins - RBC
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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.
Shares of Synopsys closed at $59.62 yesterday.
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