Taking Stock of Synopsys (SNPS) Valuation After New Securities Class Action Lawsuits Over AI Strategy

A wave of securities class actions has put Synopsys (SNPS) under the microscope, as multiple law firms allege the company understated how its pivot toward AI customers was pressuring the economics of its Design IP business.

See our latest analysis for Synopsys.

The legal overhang is arriving just as sentiment around Synopsys had started to thaw, with a roughly 17.6 percent 1 month share price return lifting the stock back to about $475.75. However, the 1 year total shareholder return remains slightly negative, and multi year gains still point to long term confidence that could be tested if these lawsuits reshape how investors see its AI pivot.

If Synopsys has you reassessing AI exposure, this is a good moment to see what else is out there by exploring high growth tech and AI stocks for other high growth tech opportunities.

With shares still below their recent peak but trading at only a modest discount to analyst targets, the real question now is whether Synopsys offers mispriced upside or whether markets are already discounting all that future AI fueled growth.

Most Popular Narrative Narrative: 14.5% Undervalued

The most followed narrative sees Synopsys trading at a meaningful discount to its estimated fair value of about $556.73 per share, despite the recent rebound in the stock.

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.

Want to see why this story assigns premium valuation to Synopsys despite legal noise and softer margins? The analysis focuses on aggressive growth, expanding recurring revenue and a higher future earnings multiple that assumes sustained leadership in next generation chip design. Curious how those moving parts add up to that fair value estimate? Explore the underlying figures that inform this narrative.

Result: Fair Value of $556.73 (UNDERVALUED)

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

However, persistent China export pressures and heavy IP investment tied to a few key customers could derail growth assumptions and compress margins faster than expected.

Find out about the key risks to this Synopsys narrative.

Another Lens On Valuation

While the narrative driven fair value points to upside, the current 68.1x earnings multiple tells a different story. It sits above both the US Software industry at 31.9x and a 41.4x fair ratio, suggesting investors are already paying up for perfection. What happens if growth wobbles?

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

Build Your Own Synopsys Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a complete view in under three minutes: Do it your way.

A great starting point for your Synopsys research is our analysis highlighting 1 key reward and 2 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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