As Synopsys (NASDAQ:SNPS) was the only real mover in after hrs trading, I thouhgt to highlight some of the analyst commentary on it this AM:
- JP Morgan notes that although Q406 results were impressive, they continue to rate SNPS shares at a neutral as they await a better entry point to own the stock. At $26 per share after hours, stock is trading at 14x FY 2007 free cash flow, which is at a slight discount to CDNS, and near what they believe is fair value for software companies in this segment.
The firm believes this is the best metric to value stock given its ratable revenue recognition model. Two other factors keep them neutral on the stock as well. First, there have been some rumblings in the semiconductor industry about a possible slowdown as we enter FY 2007, which they believe could impact RandD spending, and adversely affect EDA. Second, backlog in 2006 grew about 5% yoy to $2B while revenue guidance for FY07 is 9% at the mid-point of guidance and company expects Book-to-bill to be greater than 1.0 for the year implying acceleration in orders (bookings) in a year that could get off to a tough start.
- RBC Capital notes the company reported expenses at the low end of the guidance and cited strong progress with its expense reduction initiatives. Lower expenses combined with some slight revenue upside drove the two cents upside. Further, the company provided strong guidance for January Q1: Revenues between $292M-$300M and pro-forma EPS guidance of $0.26- $0.28. The company is benefiting from an extra week in the quarter along with a lower tax rate in FY 2007 (28-29%), however, the main driver of the upside for January is flattish expenses on rising revenues.
The firm is increasing their FY2007 pro- forma EPS estimate from $1.10 to $1.30. About $0.04 is due to the lower tax rate and the remainder is slightly higher revenues and lower expenses. They believe that the company was too conservative last quarter and is now being slightly aggressive with its guidance.
Tgt goes to $26 from $23 with the firm not recommending chasing the stock at its current price
level, as the company does have to deliver on what they consider to be slightly aggressive guidance. Recommends buying on pullbacks.
Notablecalls: Can't say I'm too familiar with the name but judging from analyst commentary and the trading dynamics (the stock had a big run yesterday on top of strong performance since July) I'd be looking for a fading oppy. More aggressive accounts may see opportunity above the $26 level. The EDA cycle is closely tied to the overall Semi cycle and longer term readers already know my views on the latter.
- JP Morgan notes that although Q406 results were impressive, they continue to rate SNPS shares at a neutral as they await a better entry point to own the stock. At $26 per share after hours, stock is trading at 14x FY 2007 free cash flow, which is at a slight discount to CDNS, and near what they believe is fair value for software companies in this segment.
The firm believes this is the best metric to value stock given its ratable revenue recognition model. Two other factors keep them neutral on the stock as well. First, there have been some rumblings in the semiconductor industry about a possible slowdown as we enter FY 2007, which they believe could impact RandD spending, and adversely affect EDA. Second, backlog in 2006 grew about 5% yoy to $2B while revenue guidance for FY07 is 9% at the mid-point of guidance and company expects Book-to-bill to be greater than 1.0 for the year implying acceleration in orders (bookings) in a year that could get off to a tough start.
- RBC Capital notes the company reported expenses at the low end of the guidance and cited strong progress with its expense reduction initiatives. Lower expenses combined with some slight revenue upside drove the two cents upside. Further, the company provided strong guidance for January Q1: Revenues between $292M-$300M and pro-forma EPS guidance of $0.26- $0.28. The company is benefiting from an extra week in the quarter along with a lower tax rate in FY 2007 (28-29%), however, the main driver of the upside for January is flattish expenses on rising revenues.
The firm is increasing their FY2007 pro- forma EPS estimate from $1.10 to $1.30. About $0.04 is due to the lower tax rate and the remainder is slightly higher revenues and lower expenses. They believe that the company was too conservative last quarter and is now being slightly aggressive with its guidance.
Tgt goes to $26 from $23 with the firm not recommending chasing the stock at its current price
level, as the company does have to deliver on what they consider to be slightly aggressive guidance. Recommends buying on pullbacks.
Notablecalls: Can't say I'm too familiar with the name but judging from analyst commentary and the trading dynamics (the stock had a big run yesterday on top of strong performance since July) I'd be looking for a fading oppy. More aggressive accounts may see opportunity above the $26 level. The EDA cycle is closely tied to the overall Semi cycle and longer term readers already know my views on the latter.
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