Mentor Graphics Receives a Buy from Credit Suisse

By Carrie Williams

Credit Suisse analyst Farhan Ahmad reiterated a Buy rating on Mentor Graphics (NASDAQ: MENT) yesterday and set a price target of $34. The company’s shares closed last Friday at $30.68, close to its 52-week high of $30.93.

Ahmad observed:

“We also believe that acquisition of MENT by Siemens Software is another sign of increasing importance of electronic design automation (EDA) in systems design, and would not be surprised if there is more M&A. We see low regulatory risk to the transaction, and see there could be some potential for competing bid. Positive for EDA Space: Bigger Positive for SNPS, Less So for CDNS: SNPS/CDNS are currently trading at ~3x/~4x on EV/Sales. The transaction value of 3.75x sales would suggest that even SNPS could be acquired for premium, but it may be difficult to get significant premium on CDNS. The transaction is also positive for smaller EDA companies, Zuken and Altium, which could be looked at by other systems company. The acquisition could also lower competition in the Core EDA but increase competition in systems design/PCB – we think this will be positive for SNPS, but less so for CDNS. Competitive Bid Is Possible, but Low Probability. We believe that even at $45 per share acquisition, MENT would have been >20% accretive (see our last note on MENT) to CY17 EPS for ANSS and Dassault. We also believe that transaction would have strategic rationale for either companies so a competing deal would not surprise us.”

According to TipRanks.com, Ahmad is a 4-star analyst with an average return of 6.5% and a 64.3% success rate. Ahmad covers the Technology sector, focusing on stocks such as Rudolph Technologies, Applied Materials, and Brooks Automation.

Mentor Graphics has an analyst consensus of Hold, with a price target consensus of $27.

The company has a one year high of $30.93 and a one year low of $16.10. Currently, Mentor Graphics has an average volume of 1.85M.

Based on the recent corporate insider activity of 28 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of MENT in relation to earlier this year. Most recently, in September 2016, Brian Derrick, the VP of MENT bought 8,700 shares for a total of $123,453.

Mentor Graphics Corp. provides electronic design automation systems-advanced computer software and emulation hardware systems, which are used to automate the design, analysis, and testing of electronic hardware and embedded systems software in electronic systems and components. It markets products and services primarily to large companies in the military/aerospace, communications, computer, consumer electronics, semiconductor, networking, multimedia, and transportation industries. It operates through the following geographical segments: United States, Europe, Japan, Pacific Rim, and Others. The company was founded in 1981 and is headquartered in Wilsonville, OR.