What Happened:
Shares of engineering simulation software provider Ansys (NASDAQ:ANSS) jumped 15.8% in the morning session after reports from Bloomberg that the company is exploring strategic options, including a potential sale. Bloomberg added that while Ansys is currently consulting with advisers, no definitive decision has been reached, and the company may ultimately choose to continue operating independently. According to a spokesperson from Ansys, "M&A rumors are not uncommon in our industry, and it's our longstanding policy not to comment on them."
Separately, Oppenheimer analyst Ken Wong said, "We expect shares to trend higher on a Bloomberg report that Ansys is evaluating takeover interest. With a market cap north of $25B, we expect a narrow pool of potential candidates. We see strategic candidates as more likely than a financial partner... We view Ansys' position as a pure play simulation leader, minimizing potential integration hurdles. Recent large software M&A appear less bound to valuation ratios due to volatile pre/post-pandemic comps, but rather 2021 levels, which would put a range of $400 in play." The analyst's projected price forecast of $400 represents a potential 30% upside from where shares were traded before rumors of the potential sale broke out. It's worth noting that most sales are executed at a premium, and the stock is likely up in anticipation that existing shareholders can exit at a higher value.
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What is the market telling us:
ANSYS's shares are somewhat volatile and over the last year have had 3 moves greater than 5%. But moves this big are very rare even for ANSYS and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 8 months ago, when the stock dropped 8.5% on the news that the company reported strong first-quarter results that exceeded analysts' revenue, operating income, free cash flow, and earnings per share (EPS) expectations. However, annual contract value (ACV) missed. In addition, revenue and EPS guidance for the next quarter and full year fell short of Consensus estimates. Overall, it was a weaker quarter for the company.
ANSYS is up 38.4% since the beginning of the year, and at $329.99 per share it is trading close to its 52-week high of $348.98 from July 2023. Investors who bought $1,000 worth of ANSYS's shares 5 years ago would now be looking at an investment worth $2,414.
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