Synopsys’ gross margin totaled $771.1 million in the quarter ended July 31, 16% wider than the $666.3 million of the year-earlier quarter.
The Mountain View, Calif., company’s shares recently traded at $215.90, up 8.9%, and have soared 54% so far this year.
Synopsys’s margin expansion should continue for years, said Berenberg analyst Joshua Tilton, according to Bloomberg. He maintained his buy rating on the stock.
The company’s operating-margin gain shows that management continues to “under-promise and over-deliver,” said Wells Fargo analyst Gary Mobley, according to Bloomberg.
He was impressed with Synopsys’s better-than-expected orders in the face of the coronavirus pandemic. The company’s sales rose 13% in the quarter ended July 31 from a year earlier. Mobley kept his overweight rating on Synopsys.
RBC analyst Mitch Steves was impressed with the increase in the company’s outlook for cash flow for the year ending Oct. 31, Bloomberg reports. He has an outperform rating on Synopsys.
Morningstar analyst Abhinav Davuluri is impressed with the company but not with its valuation.
“Despite the macroeconomic uncertainty, Synopsys continues to benefit from secular trends in artificial intelligence, 5G, and high-performance computing,” he wrote in a commentary Wednesday.
“Therefore, we are raising our fair-value estimate to $112 per share from $107 for the narrow-moat company.
"With shares trading at a premium to our estimate, we do not see an appropriate margin of safety for prospective investors.”
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BY DAN WEIL
Dan is a freelance writer whose work has appeared in The Wall Street Journal, Barron's, Institutional Investor, The Washington Post and other publications.
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