A Look at Synopsys's Valuation Following Securities Lawsuits and Q3 Earnings Miss

Synopsys (SNPS) is facing heightened attention after several class action lawsuits were filed following its disappointing third quarter results. The lawsuits allege that investor communications regarding its Design IP business and AI focus were misleading.

See our latest analysis for Synopsys.

Synopsys has been under intense pressure since its September earnings miss and the 36% single-day share price plunge that followed, an unprecedented drop for the company. Beyond legal headaches, the past several weeks brought a key C-suite exit and the announcement of major layoffs aimed at refocusing on higher-growth segments after the Ansys acquisition. After years of strong gains, momentum has clearly reversed with a year-to-date share price return of -19.25% and a one-year total shareholder return of -25.14%, putting a dent in the stock's long-term record but not erasing its five-year TSR of 78%.

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With shares trading well below recent highs and analysts’ price targets suggesting meaningful upside, investors are left asking whether Synopsys is undervalued after the selloff or if the market is rightly discounting its future growth.

Most Popular Narrative: 29.9% Undervalued

Synopsys last closed at $389.83, meaning the most widely followed narrative sees significant upside compared to this level. This outlook centers on powerful business shifts and a new growth roadmap.

The ongoing transformation towards SaaS/cloud-based EDA and Ansys product integration is expected to increase customer stickiness and shift more revenues to subscription and service models, improving revenue visibility and earnings consistency. This directly addresses operational headwinds and is likely underappreciated if the stock is undervalued.

Read the complete narrative.

How ambitious are these targets? This narrative is banking on forward-thinking strategy and radical improvements in both margins and recurring revenues. The real surprise lies in the bold projections for future profitability and valuation multiples. Find out what’s driving this double-digit upside.

Result: Fair Value of $556.40 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing export restrictions in China and significant customer concentration risk could quickly dampen sentiment and challenge the optimistic outlook for Synopsys.

Find out about the key risks to this Synopsys narrative.

Build Your Own Synopsys Narrative

If you see the story unfolding differently or trust your independent analysis, you can dive into the data and craft your perspective in under three minutes. Do it your way

A great starting point for your Synopsys research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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