SNPS - Embedded Expectations Analysis - 2020 08 20
Synopsys, Inc. (SNPS:USA) currently trades at a historical high relative to UAFRS-based (Uniform) earnings, with a 34.6x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about IP potential, margins, and growthSpecifically, management may lack confidence in their ability to sustain client wins, non-GAAP earnings per share, and strong collections. In addition, they may be overstating the potential of their first 64-bit processor IP, the sustainability of demand, and the resilience of their business model. Furthermore, they may lack confidence in their ability to meet their targets in operating cash flow, non-GAAP operating margin, and GAAP earnings range. Additionally, they may have concerns about the impact of working from home on business operations, the complexity of their software, and the slow rate of hiring. Finally, management may lack confidence about the sustainability of Electronic Design Automation (EDA) growth, and may be exaggerating the benefit of shorter contracts from Q2
Synopsys is a supplier of electronic design automation (EDA) software that engineers use to design and test integrated circuits. The company also provides semiconductor intellectual property products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves. The company provides software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them. The company is also a provider of software tools and services that improve the security and quality of software code in a variety of industries, including electronics, financial services, media, automotive, medicine, energy and industrials.
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