Synopsys rises as Baird maintains outperform rating after investor event

Main microchip on the motherboard


Synopsys (NASDAQ:SNPS) shares rose on Wednesday as investment firm Baird maintained its outperform rating after the semiconductor software company held an investor event, highlighting its opportunities for its software integrity group segment.

Analyst Joe Vruwink, who has an outperform rating and $444 per-share price target on Synopsys (SNPS), noted that the software integrity group, or SIG, segment is normally overlooked when compared to Synopsys’s Electronic Design Automation segment, but it has enormous potential in the application security lifecycle space.

“Investments across the portfolio, [go-to-market] strategy, and buildout of strategic services have led to a reacceleration of growth following a period of modest performance in [fiscal 2020 and 2021],” Vruwink wrote in a note to clients.

The analyst added that Synopsys (SNPS) management reiterated their stance that the SIG segment should see between 15% and 20% annual growth with profitability approaching “corporate levels” as it grows larger.

Synopsys’ (SNPS) SIG segment has largely been built via acquisitions – 13 since 2014 – and organic development and now generates $450M in revenue. It is considered “one of the most comprehensive” offerings in the industry, Vruwink explained, given its wide swath of products and software as it touches a number of “embedded systems,” including semiconductors, automotive and aerospace, as well as financial services, medical and industry.

With company management expecting it to be a market worth between $2.5B and $3B, Synopsys (SNPS) has a large opportunity in front of it.

“Within an industry that is characterized by ‘best of breed’ vendors, Synopsys differentiates by offering a platform that aims to give a complete view of risk across the software development cycle,” Vruwink pointed out.

The analyst also noted that the SIG segment has synergies with Synopsys (SNPS) EDA segment, as it’s believed that software will continue to grow more important and ultimately converse with system design.

Investment firm Stifel recently said Synopsys (SNPS) is likely to see continued fundamental improvement due to the “increasing complexity and challenges” of chip design and manufacturing.