CITIGROUP CUTS SYNOPSYS TO SELL FROM BUY
Citigroup analyst Terence Whelan says Synopsys (SNPS) is a high quality stock and was his favorite electronic design automation stock from December 2006 until February 2008 based on consistent growth, margin expansion, and cash flow. But he says SNPS's revised fiscal year 2009 (October) outlook softens all three merits.
Whelan says SNPS on its third quarter conference call issued preliminary fiscal year 2009 EPS guidance of $1.70-$1.80, vs. Street's $1.90, implying 1%-9% growth on 6%-7% higher sales. He says the move is particularly surprising because SNPS indicated last quarter that fiscal year 2009 sales would grow 10%+, suggesting risk that this may be one of several downward revisions.
He cuts $1.90 fiscal year 2009 EPS estimate to $1.77, and $34 price target to $20. He prefers Cadence Design Systems (CDNS) and Mentor Graphics (MENT).
RBC CUTS ESTIMATES, TARGET FOR JDS UNIPHASE
RBC analyst Mark Sue says JDS Uniphase's (JDSU) $391 million revenue was near the midpoint of guidance, yet its business mix was not what was expected, creating a drop in margins and EPS miss at $0.07, vs. $0.10 (non-GAAP) consensus. He says guidance, despite a book/bill greater than 1.0, is not too inspiring either with revenues of $378-$394 million, vs. $400 million consensus.
Sue says when things line up, the model can work well as evidenced in the second quarter, nevertheless, some macro concerns and some carrier spending lulls are creating some headwinds for JDSU near term as it strives to combine its disparate business segments and yield meaningful operating margin leverage.
He cuts $0.76 fiscal year 2009 (June) operating EPS estimate to $0.59, and $13 target to $12. He keeps sector perform opinion on the stock.