Synopsys (SNPS) AI Stock Analysis

• Market Cap: $72.03B
• Dividend Yield: N/A
• Average Volume (3M): 1.24M
• Price to Earnings (P/E): 30.4
• Beta (1Y): 1.55
• Revenue Growth: 3.21%
• EPS Growth: 31.64%
• Country: US
• Employees: 20,000
• Sector: Technology
• Sector Strength: 87
• Industry: Software - Infrastructure
• EPS (TTM): 3.39
• Shares Outstanding: 185,748,670
• 10 Day Avg. Volume: 1,276,637
• 30 Day Avg. Volume: 1,236,380
• PEG Ratio: 0.42
• Price to Book (P/B): 8.75
• Price to Sales (P/S): 12.84
• P/FCF Ratio: 61.26
• Enterprise Value/Market Cap: 1.60
• Enterprise Value/Revenue: 17.88
• Enterprise Value/Gross Profit: 23.31
• Enterprise Value/Ebitda: 73.77
• 1Y Price Target: $570.31
• Price Target Upside: 47.07% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 16

• Rating: 69 Neutral
• Price Target: $425.00 ▲(9.60% Upside)

Synopsys' overall stock score is driven by strong financial performance and strategic growth initiatives, particularly in design automation and through the ANSYS acquisition. However, technical indicators and valuation suggest caution, with potential risks from geopolitical challenges and a high P/E ratio. The earnings call provided a balanced view with both positive growth prospects and significant challenges.

Positive Factors

Revenue Growth

The consistent revenue growth indicates a strong demand for Synopsys' products and services, reinforcing its market position and providing a solid foundation for future expansion.

Strategic Acquisition

The acquisition of ANSYS enhances Synopsys' product offerings and market reach, positioning it as a leader in engineering solutions and expanding its long-term growth opportunities.

Cash Flow Management

Strong free cash flow generation supports Synopsys' operational and strategic initiatives, ensuring financial flexibility and the ability to invest in growth opportunities.

Negative Factors

IP Business Challenges

The decline in the IP business due to export restrictions and other challenges may hinder Synopsys' growth in this segment, impacting overall revenue and profitability.

Geopolitical Risks

Geopolitical tensions and export restrictions in China pose significant risks to Synopsys' operations and growth prospects in this crucial market, potentially affecting future performance.

Workforce Reduction

Reducing the workforce may lead to operational challenges and impact employee morale, potentially affecting productivity and the company's ability to capitalize on growth opportunities.

Synopsys Business Overview & Revenue Model

Company Description

Synopsys, Inc. provides electronic design automation software products used to design and test integrated circuits. The company offers Fusion Design Platform that provides digital design implementation solutions; Verification Continuum Platform that provides virtual prototyping, static and formal verification, simulation, emulation, field programmable gate array (FPGA)-based prototyping, and debug solutions; and FPGA design products that are programmed to perform specific functions. It also provides intellectual property (IP) solutions for USB, PCI Express, DDR, Ethernet, SATA, MIPI, HDMI, and Bluetooth low energy applications; analog IP, including data converters and audio codecs; and system-on-chip (SoC) infrastructure IP, datapath and building block IP, and verification IP products, as well as mathematical and floating-point components, and Arm AMBA interconnect fabric and peripherals. In addition, the company offers logic libraries and embedded memories; configurable processor cores and application-specific instruction-set processor tools for embedded applications; IP subsystems for audio, sensor, and data fusion functionality; and security IP solutions. Further, it provides Platform Architect solutions for SoC architecture analysis and optimization; virtual prototyping solutions; and HAPS FPGA-based prototyping systems, as well as a series of tools used in the design of optical systems and photonic devices. Additionally, the company offers security testing, managed services, programs and professional services, and training that enable its customers to detect and remediate security vulnerabilities, and defects in the software development lifecycle, as well as manufacturing solutions. It serves electronics, financial services, automotive, medicine, energy, and industrial areas. The company was incorporated in 1986 and is headquartered in Mountain View, California.

How the Company Makes Money

Synopsys generates revenue primarily through the sale of software licenses, maintenance and support services, and professional services. Its key revenue streams include software licenses for EDA tools, which are sold on a subscription or perpetual basis, and recurring maintenance fees from existing customers. Additionally, Synopsys earns revenue from its extensive portfolio of IP offerings, which are critical for chip makers. The company also benefits from significant partnerships with leading technology firms and semiconductor manufacturers, which not only enhance its market reach but also contribute to collaborative development efforts. Furthermore, the growing demand for advanced technologies such as artificial intelligence, machine learning, and the Internet of Things (IoT) has expanded Synopsys's customer base, driving revenue growth.

Synopsys Financial Statement Overview

Summary

Synopsys demonstrates strong revenue growth and efficient cost management, as evidenced by a high gross profit margin. However, declining net profit and EBIT margins suggest potential profitability challenges. The balance sheet shows increased leverage, which could pose risks if not managed carefully. Cash flow metrics are strong, with significant free cash flow growth, underscoring the company's ability to generate cash effectively.

Income Statement

Synopsys has demonstrated consistent revenue growth with a TTM (Trailing-Twelve-Months) growth rate of 3.49%. The gross profit margin remains strong at 76.69%, indicating efficient cost management. However, the net profit margin has decreased from 36.96% in the previous year to 31.12% in the TTM, suggesting a decline in profitability. EBIT and EBITDA margins have also decreased, reflecting potential operational challenges.

Balance Sheet

The company's debt-to-equity ratio has increased significantly in the TTM, reaching 0.55, indicating higher leverage. Despite this, the return on equity remains healthy at 14.34%, although it has decreased from 25.17% in the previous year. The equity ratio is stable, suggesting a solid capital structure.

Cash Flow

Free cash flow growth has rebounded to 19.99% in the TTM, showing strong cash generation capabilities. The operating cash flow to net income ratio is 0.42, indicating a moderate conversion of income to cash. The free cash flow to net income ratio remains robust at 0.90, highlighting effective cash management.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	6.43B	6.13B	5.33B	4.62B	4.20B	3.68B
Gross Profit	4.93B	4.88B	4.10B	3.72B	3.30B	2.85B
EBITDA	1.56B	1.94B	1.65B	1.33B	1.10B	857.40M
Net Income	2.00B	2.26B	1.23B	984.59M	757.52M	664.35M
Balance Sheet
Total Assets	48.23B	13.07B	10.33B	9.42B	8.75B	8.03B
Cash, Cash Equivalents and Short-Term Investments	2.59B	4.05B	1.59B	1.57B	1.58B	1.24B
Total Debt	15.14B	684.46M	677.60M	656.37M	666.77M	663.49M
Total Liabilities	20.62B	4.05B	4.15B	3.86B	3.45B	3.12B
Stockholders Equity	27.61B	8.99B	6.15B	5.52B	5.30B	4.91B
Cash Flow
Free Cash Flow	1.30B	1.28B	1.51B	1.60B	1.40B	832.55M
Operating Cash Flow	1.44B	1.41B	1.70B	1.74B	1.49B	991.31M
Investing Cash Flow	-15.00B	1.22B	-482.10M	-572.62M	-549.03M	-360.42M
Financing Cash Flow	14.22B	-181.30M	-1.20B	-1.12B	-748.75M	-140.61M

Synopsys Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 387.78
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SNPS, the sentiment is Negative. The current price of 387.78 is below the 20-day moving average (MA) of 585.68, below the 50-day MA of 591.25, and below the 200-day MA of 511.16, indicating a bearish trend. The MACD of -25.59 indicates Positive momentum. The RSI at 28.34 is Positive, neither overbought nor oversold. The STOCH value of 30.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SNPS.

Synopsys Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ADBE	82 Outperform	$148.54B	22.39	52.25%	―	10.69%	40.10%
PANW	80 Outperform	$131.99B	123.32	17.45%	―	14.87%	-57.43%
ORCL	71 Outperform	$669.85B	54.93	71.15%	0.58%	9.67%	11.23%
SNPS	69 Neutral	$72.03B	30.36	6.61%	―	3.21%	31.64%
FTNT	67 Neutral	$60.90B	31.72	165.17%	―	14.46%	48.06%
ZS	67 Neutral	$43.41B	―	-2.70%	―	23.31%	31.04%
Sector *	61 Neutral	$36.58B	11.16	-10.43%	1.86%	8.71%	-7.09%