Keybanc Reiterates Overweight on Synopsys, Lowers PT to $590.

Keybanc Reiterates Overweight on Synopsys, Lowers PT to $590.

Keybanc Capital Markets reiterated its "Overweight" rating on Synopsys (SNPS) stock, while lowering its price target to $590. This comes on the heels of the company's fiscal Q3 2025 earnings report, which missed Wall Street's expectations and offered mixed guidance.

Synopsys reported adjusted earnings of $3.39 per share on sales of $1.74 billion for the quarter ended July 31. Analysts had anticipated earnings of $3.80 per share on sales of $1.77 billion Synopsys Stock Tumbles After Missing Estimates^[1]. The company's stock dropped 5% in extended trading to close at $574, following a 0.8% dip during the regular session Synopsys Stock Tumbles After Missing Estimates^[1].

Keybanc's downgrade is attributed to the company's weaker-than-expected intellectual property (IP) revenue, which was negatively impacted by China export restrictions and uncertainty around Intel's foundry business. The firm also cited higher costs from the $35 billion acquisition of Ansys as a factor BofA downgrades Synopsys on weak outlook and Ansys costs^[2].

Despite the downgrade, Keybanc maintained its "Overweight" rating, noting that Synopsys remains a high-quality company. The firm expects the company to benefit from synergies from the Ansys acquisition and sees potential for growth in customized IP. However, it warns that the stock may remain volatile due to persistent uncertainty over the foundry potential at top customer Intel and the company's reliance on IP revenue.

Keybanc contrasted Synopsys with rival Cadence Design Systems, which it called its top pick in electronic design automation. The firm noted that Synopsys' reliance on IP revenue makes it more vulnerable to market fluctuations compared to Cadence, which has higher TSMC exposure and stronger hardware (HW) and profitability.

Synopsys stock has been volatile in recent weeks, forming a bullish flag pattern ahead of its quarterly results. The stock has dropped by 8.35% from its highest point this year, nearing a correction phase Synopsys stock price bullish flag points to a surge after earnings^[3]. Keybanc's revised price target of $590 suggests that the firm expects the stock to bounce back from its recent lows.

In conclusion, while Keybanc's downgrade reflects concerns over Synopsys' recent earnings and the impact of the Ansys acquisition, the firm's "Overweight" rating indicates that it remains bullish on the company's long-term prospects. Investors should closely monitor the company's upcoming earnings report and the potential for synergies from the Ansys acquisition.