Why Did An Analyst Maintain Buy For Microsoft And Synopsys Stocks?

While Microsoft Corporation’s MSFT Azure gained market share in the second quarter, Synopsys, Inc. SNPS Fusion Compiler and AI/ML-enabled suite contributed to revenue growth in the latest quarter, according to Rosenblatt Securities.

The Software Analyst: John McPeake reiterated Buy ratings for Microsoft and Synopsys, while maintained the price target for both companies at $349.

The Software Thesis: Revenues from Azure grew by 37% in the second quarter, McPeake said in the note to clients.

“Microsoft grew 1,200bp faster YY in constant dollar terms in 2Q. Amazon's AWS grew 37% YY constant currency in 2Q, which was better than the +31% Bloomberg consensus, but still lower than Azure's +45% YY. Azure added $1.1B in QQ dollars in 2Q vs. AWS's $1.3B, despite being 40% smaller,” he noted.

Meanwhile, Synopsys CFO Trac Pham indicated that all business lines and geographies remained strong and “their unified data model (Fusion Compiler) and AI/ML-enabled suite (DSO.ai) are helping drive good growth in renewals, with the former having more near-term impact and DSO.ai likely increasing over the next year-plus,” McPeake wrote in a separate note.

“Finally, the System Integrity business' recent outperformance was cited as driven by demand from financial services, automotive, aerospace and defense, as well as general enterprise demand,” the analyst said.

MSFT and SNPS Price Action: Shares of Microsoft had declined by 1.71% to $300 and Synopsys by 2.96% to $325.08 at the time of publication Friday afternoon.

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