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Stifel Nicolaus's Ruben Roy raised their price target on Synopsys (NASDAQ: SNPS) by 12.7% from $550 to $620 on 2023/11/30. The analyst maintained their Strong Buy rating on the stock.

Synopsys is the dominator of the EDA (Electronic Design Automation) industry and is diversifying its revenue stream into a broader set of software tools, the analyst told investors in a note assessing the company's Q4 and FY 2023 report, released on 2023/11/29.

Importantly, given accelerating design automation opportunities ahead, management, after a strategic portfolio review, has decided to explore strategic alternatives for its SIG business segment (~8% of revenue), Roy reported, citing management commentary during the conference call.

"An outcome in which the SIG business is divested or spun out is a meaningful positive, longer-term outcome for the company," the analyst said.

Synopsys is taking a more pragmatic approach to its China business, given the strong growth in recent fiscal years and the ongoing macroeconomic downturn in the region, Roy continued, adding that "the company has not seen any changes to existing export restrictions on its technology."

Earnings Report

Synopsys reported:

For Q4 2023:

• EPS of $3.17, which beat the Zacks Consensus Estimate of $3.04 and, by 65.9%, Q4 2022’s $1.91.
• Revenue of $1.6B, which beat the Zacks Consensus Estimate of $1.58B and, by 25%, Q4 2022’s 1.28B.

For FY 2023:

• EPS of $11.19, which beat FY 2022’s $8.90 by 25.7%.
• Revenue of $5.84B, which beat FY 2022’s $5.08B by 15%.

Management guided:

For Q1 2024:

• EPS of $3.40 to $3.45.

For FY 2024:

• EPS of $13.33 to $13.41.

Chairman & CEO Aart de Geus commented: "In our 37 years as a company, Synopsys has driven a roughly 10 million-fold increase in chip design productivity.

“This not only enabled the exponential ambition of the semiconductor industry, it, in turn, radically impacted the world.

"Our momentum continued in 2023 as we substantially expanded our AI-driven design differentiation, our semiconductor IP portfolio, and our multi-die system solutions.

“We also visibly strengthened our customers' differentiation through unique and deep collaborations.

“Looking ahead, I have great confidence, expectations, and enthusiasm for our future as Sassine Ghazi becomes Synopsys' CEO." 

President & COO Sassine Ghazi commented: "We start 2024 with tremendous forward momentum driven by a resilient business model, technology trends – chief among them AI – that create a rising tide for our business, and customers who continue to prioritize investments in the chips and systems that position them for the future.

“I am profoundly grateful for the opportunity to propel Synopsys to the next wave of growth as its CEO."