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On Thursday, KeyBanc Capital Markets sustained its Overweight stock rating for Synopsys (NASDAQ:SNPS), a leader in electronic design automation (EDA), with a price target of $575.00. Currently trading at $462.43, the stock has experienced a notable 8.15% decline over the past week. The firm’s analyst, Jason Celino, highlighted that while Synopsys reported second-quarter results that aligned with expectations, the company foresees a potential decline in its China business by fiscal year 2025. Despite this, Synopsys anticipates compensatory growth in other regions, as well as in its intellectual property (IP) and hardware (HW) sectors. According to InvestingPro analysis, the company maintains impressive gross profit margins of 81.35% and holds more cash than debt on its balance sheet, suggesting strong financial fundamentals.
Synopsys also reaffirmed its intention to finalize the acquisition of Ansys (NASDAQ:ANSS) within the first half of the year. However, the company’s outlook faces uncertainty due to the possibility of a comprehensive ban on EDA technology in China. While Synopsys has not yet received any official notice from the Bureau of Industry and Security (BIS) at the time of their earnings call, there is an expectation of such a notice being imminent. KeyBanc acknowledges this as an increased risk for the company’s operations in China but remains bullish on the EDA sector overall. With a market capitalization of $71.5 billion and a current ratio of 2.68, InvestingPro data shows the company maintains strong liquidity to navigate potential challenges.
KeyBanc’s analysis takes into account the recent financial results and the updated forecast provided by Synopsys, which also extends into their fiscal year 2026 projections. Despite the potential challenges in China, KeyBanc continues to see the EDA space as highly attractive, citing enduring industry tailwinds and opportunities for Synopsys in areas like 3D integrated circuits (3D-IC) and artificial intelligence (AI).
Synopsys’ commitment to growth and innovation, coupled with the strategic acquisition of Ansys, positions the company to potentially navigate through the regional challenges. The firm’s steadfast Overweight rating and price target reflect confidence in Synopsys’ long-term growth trajectory, notwithstanding the looming uncertainties in its Chinese market segment.
In other recent news, Synopsys reported its second-quarter 2025 earnings, showcasing a non-GAAP earnings per share (EPS) of $3.67, which exceeded the forecast of $3.39. The company maintained its revenue forecast at $1.6 billion, aligning with expectations and reflecting a 10% year-over-year increase. Synopsys has also reaffirmed its full-year revenue guidance, projecting between $6.745 billion and $6.805 billion. In terms of analyst actions, BofA Securities analyst Vivek Arya raised the price target for Synopsys to $575, maintaining a Buy rating, citing solid second-quarter results and a modest EPS beat.
Synopsys has not received any notification from the Bureau of Industry and Security regarding potential export restrictions to China, though sales in China have declined to $330 million in the first half of 2025 from $460 million in the same period of 2024. Despite this, the company anticipates approximately 11% growth in fiscal year 2025, with strong performance outside China. Additionally, Synopsys is on track to complete the acquisition of Ansys by the end of June 2025, pending discussions in China.
The company’s Design IP segment showed significant growth, increasing by 21% year-over-year, while the Design Automation segment saw a 6% increase. Synopsys continues to emphasize its strategic focus on AI-powered design tools and its AgenTek AI platform, which aims to revolutionize engineering workflows. The company remains confident in its ability to meet its financial targets despite challenges in the Chinese market.
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