Goldman Sachs Initiates Coverage on Synopsys with Buy Rating

Goldman Sachs initiated coverage on Synopsys (SNPS) with a "Buy" rating and a price target of $620. The firm's positive outlook could influence investor sentiment. The average one-year price target from 20 analysts is $587.69, with an upside of 6.67% from the current price. The estimated GF Value for Synopsys in one year is $631.59, indicating a 14.64% upside.

Goldman Sachs has initiated coverage on Synopsys (SNPS) with a "Buy" rating and a price target of $620.00 [1]. The firm's positive outlook could influence investor sentiment, as the average one-year price target from 20 analysts is $587.69, indicating an upside of 6.67% from the current price of $550.95 [1]. Additionally, the estimated GF Value for Synopsys in one year is $631.59, suggesting a 14.64% upside [1].

The investment bank identified Synopsys as a critical provider of semiconductor design software tools with exposure to multiple growth drivers throughout the industry [2]. Goldman Sachs noted a broadening customer base driving outsized growth in the company’s intellectual property franchise, while physical electronic design automation (EDA) represents a meaningful growth opportunity [2]. The firm acknowledged ongoing potential headline risk from China export restrictions that could affect the company [2].

Synopsys reported strong financial results for its second fiscal quarter, with adjusted earnings per share of $3.67, surpassing analyst estimates of $3.39 [2]. The company’s revenue for the quarter reached $1.604 billion, marking a 10.2% year-over-year increase [2]. The U.S. Department of Commerce recently rescinded export restrictions related to China, allowing Synopsys to restore access to previously restricted products [2].

Synopsys faces challenges, including a decline in revenue from China due to macroeconomic conditions and export restrictions, as well as potential regulatory challenges in securing China regulatory clearance for its Ansys acquisition [1]. Additionally, the macroeconomic environment remains dynamic, with non-AI end market demand remaining subdued [1]. The company has issued a $10 billion bond, resulting in net interest expenses impacting its financials [1].

Synopsys is leading in AI for chip design, with significant customer adoption of its AI capabilities, including DSO.ai and VSO.ai [1]. The company is confident in closing its pending acquisition of Ansys, which will enhance its AI-powered silicon to system design solutions [1]. The planned $35 billion merger between Synopsys and Ansys has been postponed by China’s market regulator, following tightened chip export controls by the U.S. government [2].

References:
[1] https://www.gurufocus.com/news/2968496/synopsys-snps-gets-buy-rating-from-goldman-sachs-with-620-target-snps-stock-news
[2] https://za.investing.com/news/analyst-ratings/goldman-sachs-initiates-synopsys-stock-coverage-with-buy-rating-93CH-3784397