Leading chip design company Synopsys (NASDAQ:SNPS) is prepared to divest its Software Integrity business, Bloomberg reported. Per the report, the company is working with advisors, and a deal could value the business at $3 billion.
The company’s Software Integrity business provides solutions to test software code for security vulnerabilities and quality defects. It accounts for about 9% of Synopsys’ total revenue. Last year, Synopsys said that it was considering various alternatives for its Software Integrity business following a comprehensive portfolio review and consultations with the Board of Directors.
Notably, the Software Integrity segment encountered challenges due to lower enterprise spending amid macro headwinds. As SNPS’ customers tightened their budgets, it has impacted the average order size, the company’s pricing, and contract durations. Synopsys expects the ongoing macroeconomic headwinds to continue to affect its Software Integrity business in the near term.
Is Synopsys Stock a Good Buy?
Synopsys stock has gained nearly 54% over the past year. The notable increase in its share price reflects strong revenue and earnings growth and stellar 2024 guidance. SNPS’ adjusted earnings per share jumped 26% year-over-year in 2023. Further, it expanded the company’s backlog to $8.6 billion. Looking ahead, the company expects double-digit revenue growth in 2024.
Thanks to the momentum in its business, Wall Street is bullish about its prospects. SNPS stock has received 10 unanimous Buy recommendations for a Strong Buy consensus rating. Analysts’ average price target of $618 implies 11.5% upside potential from current levels.
