SynopsysSNPS260,04 $
Today we have a speculative idea: take shares in CAD developer Synopsys (NASDAQ: SNPS), in order to make money on their rebound after a strong drop.
Growth potential and validity: 18,5% behind 15 Months; 43,5% behind 3 of the year.
Why stocks can go up: because recently they have fallen a lot, and the foundation of the company's business is strong.
How do we act: we take shares now by 269,62 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
Synopsys is a provider of products and services for the production of complex electronics. We already had a successful investment idea for the company, where the structure of her business is described in detail, and since then, nothing has changed in the structure of its operations. So let's not repeat ourselves here..
Arguments in favor of the company
Fell down. The company's shares have plummeted in the past six months.: from 375 to 269,62 $. Think, given the circumstances below, we can hope for a rebound.
As before. The demand for the production of high-tech products is now even higher, than a year ago, so i would expect, that Synopsys' financial performance will continue to grow for a long time.
Better Cadence. Compare Cadence, for which there has already been a successful investment idea, с Synopsys. For a number of parameters - gross, operating and closing margin - Cadence looks cooler. But if you look at P / S and P / E, then Cadence looks quite expensive compared to Synopsys. Although I will make a reservation, that both companies are not cheap.
Anyway, based on these moments, a lot of institutional investors can run into Synopsys shares.
Can buy. Given these circumstances, Synopsys may well buy. In absolute numbers, it costs acceptable money.: its capitalization is about 41.41 billion. And considering that, that it is a profitable and high-margin business with good growth rates, I wouldn't be surprised, having learned, that the company is being bought. This is especially true against the background of large investments in the field of semiconductors..
activated carbon. In light of the decline and stagnation of the company's quotes, I would not be surprised to see an activist investor among its shareholders, which may require the following steps:
- Putting a company up for sale.
- Introduction of dividends.
- Allocations to a separate issuer of one of the company's divisions.
What can get in the way
Price. May be, Cadence and more, but still Synopsys itself cannot be considered a criminally undervalued company: P / S she has 9,45, a P / E — 46,78.
Your expectations are your problems. The strong drop in stocks over the past six months is due to, that the company slightly failed to meet the overestimated expectations of analysts. Mindful of the considerable price of Synopsys, should be considered, that another "disappointment" could lead to a strong drop in quotes.
Synopsys earnings per share in dollars
| 2к2021 | 3к2021 | 4к2021 | 1к2022 | 2к2022 | |
|---|---|---|---|---|---|
| Current | 1,70 | 1,81 | 1,82 | 2,40 | — |
| Forecast | 1,53 | 1,78 | 1,79 | 2,38 | 2,37 |
Synopsys revenue figures, billion dollars
| 2к2021 | 3к2021 | 4к2021 | 1к2022 | 2к2022 | |
|---|---|---|---|---|---|
| Current | 1,02 | 1,06 | 1,15 | 1,27 | — |
| Forecast | 0,988 | 1,05 | 1,15 | 1,27 | 1,26 |
Extension. There is some possibility that, that Synopsys will actively expand — and, maybe, she'll try to buy Cadence. Although it will be beneficial for Synopsys in the long run, for short-term investors it will be a disaster.
Cadence is about the same price as Synopsys, so the latter will have to take on a huge debt, maintenance of which will become a problem in an era of high rates. See also, maybe, will have to deal with the issuance of new shares to finance part of the purchase, which may lead to a drop in quotations due to the dilution of the share of existing shareholders.
I don't think the likelihood of this kind of news is very high., but still it should be kept in mind.
Synopsys may also be generous to acquire another technology company, slightly less, - but, probably, here, too, it will not do without an increase in the volume of debts and the issuance of new shares.
What's the bottom line?
Shares can be taken now for 269,62 $. And then there are the following options:
- wait for the stock to rise 319 $. Think, we will reach this level in the next 15 Months;
- expect stocks to return to levels 375 $. Here it is better to focus on 3 years of waiting.
