Synopsys (SNPS): Evaluating Valuation After Earnings Miss and Lowered Outlook on China, Intel Headwinds

If you’re holding or eyeing Synopsys (SNPS) right now, the latest earnings update might feel like a curveball. The company missed its third-quarter earnings expectations by a surprising margin and trimmed its outlook for the next quarter, attributing much of the trouble to tighter export rules targeting China and a cooling sales pipeline from Intel. For investors, this kind of reset can be unsettling, especially when recent collaborations with TSMC had painted a picture of strong momentum in advanced chip design and AI.

Looking beyond the disappointment, Synopsys’ stock hasn’t exactly wowed over the past year, dipping about 5% even as three- and five-year returns remain strong. The stock clawed back some ground after buzzworthy partnerships with NVIDIA and Intel, but the weak earnings and forecast update have changed how the market sees its risk and growth story. Recent leadership changes and TSMC announcements suggest a company still working hard to stay on the cutting edge, even as some headwinds gather.

So with Synopsys facing both powerful partnerships and real near-term challenges, is the stock now trading at an attractive value, or is the market simply baking in years of future growth expectations?

Most Popular Narrative: 14.3% Undervalued

According to the most widely followed narrative, Synopsys shares are undervalued relative to their calculated fair value based on analysts’ assumptions about future earnings and business momentum.

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. This may improve revenue visibility and earnings consistency, directly addressing operational headwinds and potentially being underappreciated if the stock is undervalued.

Looking for the real story behind this valuation call? The calculation hinges on bold revenue and profit growth assumptions, along with a price multiple that is rarely seen in this industry. Want to know exactly how these high-powered projections could propel Synopsys well above today’s price? The full narrative reveals the numbers and tensions shaping this bullish target.

Result: Fair Value of $569.19 (UNDERVALUED)

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

However, persistent export restrictions or unexpected weakness in Synopsys’ IP business could undermine these bullish assumptions and limit the company’s future growth potential.

Find out about the key risks to this Synopsys narrative.

Another View: Price Tags Tell a Different Story

Not everyone agrees Synopsys is undervalued. When you compare how much investors pay for today's profits against the industry, the company actually looks expensive. Could the market be pricing in more risk instead of growth?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding Synopsys to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Synopsys Narrative

If the story doesn't quite fit your view or you’d rather run the numbers your own way, you can craft a fresh perspective in just minutes. Do it your way

A great starting point for your Synopsys research is our analysis highlighting 1 key reward 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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