Analyst Note| Abhinav Davuluri, CFA |
Narrow-moat Synopsys reported strong third-quarter results, with revenue and adjusted EPS surpassing both management’s and our at-consensus expectations. The firm raised its fiscal 2022 outlook, reflecting the intensified demand environment as consumer and business applications require both higher chip content and complexity. We expect Synopsys to continue to benefit from the increasing reliance on automation in design flows, and therefore raise our fair value estimate to $343 per share from $334. Like many other companies in the sector, Synopsys has enjoyed a bounce back in share price following the software selloff earlier in the year, however, with shares trading around $384 after-hours, we view the shares as overvalued.