Analysts have lowered their price targets on Synopsys, with recent adjustments ranging from $550 to $630 per share. Concerns about persistent headwinds in the company’s IP business, along with ongoing challenges in China and with key customers, are impacting the near-term growth outlook.

Analyst Commentary

Recent analyst notes reflect a mixed outlook on Synopsys, with heightened attention on ongoing challenges within the company’s IP segment, as well as external factors shaping growth prospects. While price targets were broadly lowered, analysts offered both constructive optimism and points of caution regarding Synopsys's future performance.

Bullish Takeaways

• Bullish analysts maintain positive long-term views on Synopsys’s non-IP business segments. These areas are tracking in line with previous expectations and are seen as likely to support steadier growth through FY26.
• There is an expectation that current headwinds related to China and certain large customers are temporary and should eventually subside. This could potentially restore investor confidence and stabilize revenue growth.
• Analysts note ongoing internal efforts, such as resource reallocation within the IP business and operational streamlining. These actions could accelerate profitability targets and better position the company as industry dynamics evolve.
• Despite short-term pressure on shares, improvements in operational clarity and execution could create upside scenarios, especially if international demand and customer spending recover as anticipated.

Bearish Takeaways

• Bearish analysts flag persistent weakness in the IP segment, noting that muted performance is now expected to last through FY26. This significantly dampens near-term growth outlooks and weighs on valuation.
• Export restrictions and uncertainty in China continue to impact customer confidence and design starts. This is leading to reduced spending and a more cautious approach to resource allocation in key geographic markets.
• Strategic pivots by large foundry customers mean existing IP investments may no longer yield results. This adds further uncertainty to Synopsys’s revenue stream and requires adjustments to forecasts.
• Analysts highlight limited visibility into major partner roadmaps, which complicates projections on when key opportunities will materialize and further pressures stock performance in the near term.

What's in the News

• Tata Technologies and Synopsys have entered a strategic partnership to accelerate the shift towards software-defined mobility. The companies are combining deep vehicle engineering expertise and virtualization solutions to support OEMs worldwide. (Key Developments)
• Synopsys unveiled a digital twin racetrack experience, utilizing NVIDIA Omniverse, at the Aramco STEM Racing World Finals. This initiative gives over 400,000 students globally complimentary access to advanced CFD simulation tools. (Key Developments)
• Synopsys and TSMC expanded their collaboration by certifying Ansys simulation solutions for advanced manufacturing nodes and developing AI-assisted design flows to optimize chip design for AI, communications, and automotive applications. (Key Developments)
• Synopsys announced growth in its generative AI Copilot capabilities for semiconductor design. The aim is to accelerate development, boost engineer productivity, and help address workforce shortages across customer organizations. (Key Developments)
• Synopsys joined the JOINT3 consortium, a global partnership of 27 companies focused on developing advanced panel-level organic interposers for next-generation semiconductor packaging. Pilot manufacturing is slated for 2026. (Key Developments)

Valuation Changes

• Fair Value: Remains unchanged at $556.4 per share, indicating stable analyst consensus despite recent business headwinds.
• Discount Rate: Marginally decreased from 8.98% to 8.97%. This reflects slightly lower perceived risk in future cash flows.
• Revenue Growth: Holds steady at approximately 21.47%, which signals maintained expectations for top-line expansion.
• Net Profit Margin: Edged down from 15.77% to 15.75%. This suggests a slight moderation in profitability projections.
• Future P/E: Increased modestly from 89.85x to 89.95x. This indicates a minor rise in expectations for future earnings multiples.