Synopsys (SNPS): Valuation Insights After Q3 Miss, Profit Warning, and Foundry Setbacks

If you are following Synopsys (SNPS), it has been an eventful few weeks that are sure to put the stock on your radar. The recent Q3 earnings miss, a rare negative earnings outlook for the upcoming quarter, and a list of complications including issues with a major foundry customer and export-related sales declines sparked a dramatic 36% single-day plunge in the share price. This is not just a small dip but the company’s sharpest loss since its IPO, and it has already triggered a legal investigation into possible shareholder disclosure violations. While management is keen to highlight the fresh Ansys acquisition and ongoing AI initiatives, investors are left wondering if these positives can outweigh the near-term pain in the IP business and sudden profit warnings.

This sell-off puts Synopsys’ recent momentum in stark relief. After years of smooth growth, both in revenue and net income, confidence was clearly shaken as shares slid a steep 27% in the past week and are now down 15% over the last year, even as the company boasts a 108% gain over the past five years. Notably, the weak quarter and projected Q4 loss seem to have broken the trend of outperformance, despite continued acquisitions, product launches, and a push into AI-powered design tools. The market’s swift reaction shows risk perceptions have shifted, at least for now.

So, with the stock’s long-term performance and growth story facing its biggest stress test in years, is this a rare chance to buy Synopsys at a discount, or is the market finally pricing in real risks that could linger?

Most Popular Narrative: 25% Undervalued

According to the most widely followed narrative, Synopsys shares are priced well below their estimated fair value. The recent market turbulence has heightened potential for upside if the long-term story holds.

The acquisition and integration of Ansys positions Synopsys as the global leader in engineering solutions from silicon to systems. This dramatically expands its addressable market into sectors like automotive, industrial, and aerospace. This should drive long-term top-line growth as more sophisticated and complex products (especially AI-powered and smart devices) require robust simulation, analysis, and EDA tools.

Is Wall Street underestimating Synopsys’ next act? The narrative’s bold projections hinge on game-changing shifts in revenue, margins, and sector dominance. Want to know what financial assumptions power this call and just how aggressive those expectations really are? Dive deeper to unpack the case fueling this valuation.

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 disappointing customer demand in China could undermine Synopsys’ growth narrative and renew pressure on the stock.

Find out about the key risks to this Synopsys narrative.

Another View: What Do Earnings Ratios Say?

Looking beyond analyst price targets, current price-to-earnings metrics suggest Synopsys trades at a premium compared to the industry average. Is the market recognizing potential others are missing, or could there be more risk than reward?

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 you see things differently or want a look at the details firsthand, you can quickly build your own view using the same data in your way: 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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