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On Thursday, Stifel analysts maintained a positive stance on Synopsys (NASDAQ:SNPS) shares, reiterating a Buy rating and a $550.00 price target. Currently trading at $473.07, the stock appears slightly undervalued according to InvestingPro analysis. The semiconductor industry’s recent earnings report highlighted robust second-quarter results, with a notable $400 million quarter-over-quarter increase in backlog and a roughly $172 million rise in calculated remaining performance obligations (cRPO). The company’s impressive 81.35% gross profit margin and strong financial health score underscore its operational efficiency.
Despite facing uncertainties in the China market, Synopsys management has kept its full-year outlook steady. This decision comes amid concerns about potential sales disruptions in China, which were previously suggested by various media reports. However, Synopsys confirmed that it has not been informed by the Bureau of Industry and Security (BIS) of any halt in its China sales, and thus, the current guidance does not account for such a scenario. With revenue growth of 8.51% and a market capitalization of $73.15 billion, the company maintains a strong market position despite recent headwinds that led to an 8.15% decline in share price over the past week.
The company also remains on track to finalize the acquisition of ANSS in the first half of the year. Stifel analysts suggest that any restrictions on China sales could inadvertently simplify the completion of this pending acquisition. While the analysts express confidence in the fundamental strength of Synopsys’s core business and its alignment with the semiconductor industry’s ongoing trends, they acknowledge that the valuation approach may require reassessment depending on the final developments in China.
Synopsys’s performance and strategic moves seem to reinforce the company’s resilience and adaptability in a dynamic global market. The continued Buy rating from Stifel reflects confidence in the company’s future prospects and its ability to navigate through potential geopolitical challenges.
In other recent news, Synopsys reported its second-quarter 2025 earnings, delivering a non-GAAP 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 reaffirmed its full-year revenue guidance of $6.745 to $6.805 billion. Synopsys also emphasized strong growth in its Design IP segment, which increased by 21% year-over-year. Despite a decline in sales in China, dropping to $330 million in the first half of 2025 from $460 million in the same period in 2024, the company’s performance outside China showed resilience with a 7% increase in sales on a rolling four-quarter basis.
Additionally, Synopsys is on track to finalize the acquisition of Ansys (NASDAQ:ANSS) by the end of June 2025, with approvals secured in all regions except China, where discussions are ongoing. Analyst firms KeyBanc Capital Markets and BofA Securities have both expressed confidence in Synopsys’ future, maintaining their Overweight and Buy ratings, respectively, with a price target of $575. KeyBanc noted the potential risk of a comprehensive ban on EDA technology in China but remains optimistic about the EDA sector’s prospects. Synopsys’ strategic focus on AI-powered design tools and its ongoing negotiations for the Ansys acquisition highlight its commitment to growth and innovation amid regional challenges.
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