Synopsys (SNPS) Hits 52-Week High Just Ahead Of Q3 Earnings

Shares of Synopsys, Inc. (NASDAQ:SNPS) scaled a new 52-week high of $78.97 during yesterday’s trading session, before closing a tad lower at $78.23. This comes a day before its third-quarter fiscal 2017 earnings release which is scheduled to be announced after the market close.

Notably, the stock has added 32.9% on a year-to-date basis, outperforming the industry’s gain of 21.7%.

The recent momentum in share price reflects investor confidence that the company may once again report splendid results for the third quarter. We note that the stock has an excellent track record of exceeding the quarterly earnings expectations. With respect to the earnings surprise history, Synopsys has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average surprise of 21.9%.

Apart from this, the company’s impressive third-quarter outlook and upbeat fiscal 2017 guidance have also aided the year-to-date upward movement in share price. For the third quarter, the company expects revenues in the range of $685-$700 million and non-GAAP earnings per share in the range of 91-94 cents.

For fiscal 2017, Synopsys raised its revenues and non-GAAP earnings per share guidance range to $2.650-$2.670 billion and $3.24-$3.29, respectively, from $2.58-$2.61 billion and $3.21-$3.26.

Other Factors Driving the Stock

We believe that the company’s sustained focus on introducing new products, acquisitions and deal wins will continue to boost results, going ahead. Moreover, unique intellectual properties and global support provided by the company are likely to drive forthcoming results.

We are also positive about Synopsys’ time-based license revenue model, under which, customers effectively rent the software, rather than paying a one-time upfront license fee. Hence this is a much more predictable revenue model, providing better visibility through a steady and recurring revenue stream.

Additionally, the acquisition of Cigital and Codiscope will enable Synopsys to offer a comprehensive software security signoff solution to its customers.

We are also encouraged by Synopsys’s endeavor to return shareholder value through continued share buybacks and dividends. These investor-friendly initiatives not only boost earnings but also inspire investor confidence and loyalty.

Synopsys, Inc. Price and Consensus

Synopsys, Inc. Price and Consensus | Synopsys, Inc. Quote

Currently, Synopsys carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the broader tech space include Lam Research Corp. (NASDAQ:LRCX) , IPG Photonics Corp. (NASDAQ:IPGP) and Ultra Clean Holdings, Inc. (NASDAQ:UCTT) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, Lam Research, IPG Photonics and Ultra Clean Holdings delivered average positive earnings surprises of 4.44%, 9.15% and 27.73%, respectively.

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