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Synopsys Inc
SNPS-Q
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Sep 10, 2025
Stock price when the opinion was issued
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Their software is powering Nvidia to make GPU chips. SNPS shares have run up as a result, though weakened in the past month. Price-to-cash flow is estimated to fall between 2025 and 2026, so the street expects the company to grow a lot. He believes AI will continue to grow. SNPS's valuation isn't extreme like others in AI.
Still owns this and CDNS and Ansys stock, a peer, which dominate this space. The stock is stuck because it's stuck in UK regulations, though he expects it to be approved next year. When it does, SNPS will be the king of this space. His price target is $648. They last beat the top and bottom lines. Buy this at $440-460 or even now.
Premium contentHowever, if you want a higher return and can swallow the risk, then SNPS on the Nasdaq could more your speed. The tech company enjoys a duopoly in semiconductor design. Their Anysys acquisition should add value, while AI will continue to be a tailwind. Its EBITDA per share growth lies in the top 10% com-pared with peers globally. Earnings are robust and have beaten in the last four quarters with room to spare.
The competitor to CDNS. Just finished acquisition of third-largest designer software firm. Digestion problems on that, so stock dropped 35% on reporting. Report was good, but "whisper" numbers were a heck of a lot higher.
Great place to buy. He'd actually sell some puts at just a little bit lower, to get some income. If you get hit at your strike price, then you're buying a little bit lower.
EPS of $3.39 missed estimates of $3.81. Revenue of $1.74B missed estimates of $1.77B. Synopsys missed fiscal 3Q results due to a major shortfall in its Design IP business (25% of total sales), which fell 7.7% to $428 million, lower by about $125 million than consensus. The factors for the weakness included China export restrictions that disrupted design starts, with an impact on customers beyond the six-week BIS ban, challenges at a major foundry customer and road-map decisions that yielded unfavorable results. Design Automation grew 24% on traction in digital (Fusion Compiler) and its hardware-assisted verification. Fiscal 2025 revenue guidance of $7.045 billion at the midpoint is lower than expected, given Ansys' quarterly sales of $600 million. Mixed end markets remain, with industrial, autos and mobile trailing AI/high-performance computing. Some drop in the stock is certainly warranted, but 34% seems harsh. Good earnings growth is still forecasted, but investors are a bit skittish because of the new large debt level with the Ansys deal. We would not expect much for the balance of the year and would not add here, but we think it is still a solid company with a good overall outlook.
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