Synopsys Sticks To FY21 Outlook After 1Q Sales Beat Estimates

Synopsys reaffirmed its FY21 outlook after reporting better-than-expected 1Q results. Meanwhile, the software maker issued 2Q guidance, the mid-point of which only exceeded the Street’s estimates. The stock fell 1.3% in Wednesday’s extended trading session.

Synopsys’ (SNPS) 1Q earnings of $1.52 per share beat the consensus estimates of $1.46 per share and grew 50.5% year-over-year. The company’s 1Q revenues rose about 16.3% year-over-year to $970.3 million and topped the Street’s estimates of $954.4 million.

Synopsys recorded growth across all geographies and product categories. The company’s 1Q performance benefitted from the growing demand for big data, machine learning, and faster computation.

For 2Q, Synopsys forecasted adjusted EPS in the range of $1.50-$1.55 (mid-point $1.525). Analysts expect the company to post EPS of $1.51. Revenues are projected to generate $970 million to $1 billion (mid-point $985 million), compared to consensus estimates of $979.9 million. (See Synopsys stock analysis on TipRanks).

Synopsys reiterated its fiscal 2021 outlook. The company forecasts adjusted EPS in the range of $6.23-$6.30, compared to the consensus estimates of $6.29 per share. Revenues are anticipated to land between $4-4.05 billion. Analysts were looking for sales of $4.03 billion in fiscal 2021.

Ahead of the quarterly results, RBC Capital analyst Mitch Steves raised the stock’s price target to $330 (16.3% upside potential) from $250 and reiterated a Buy rating.

Steve expected the company to report upbeat 1Q results, while he remained positive on the stock. The analyst believes that EPS estimates are low in view of multiple expansion possibilities in the future.

Overall, consensus among analysts is a Strong Buy based on 8 Buys and 1 Hold. Following the 74% share rally over the past year, the average analyst price target of $303.13 implies further upside potential of about 6.8% to current levels.