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Investing.com -- Bank of America cut its rating on Synopsys to Underperform from Buy on weak outlook for the software maker’s intellectual property business tied to Intel and China, and higher costs from the $35 billion acquisition of Ansys.
Analysts said Synopsys missed about $140 million of expected IP revenue in the third quarter, hit by China export restrictions and uncertainty around Intel’s foundry business, which has historically made up about 12% of sales. The firm cut its earnings forecasts for 2025-27 by as much as 16% and lowered its price target to $525 from $625.
“SNPS is a high quality company but uncertainty over FY26/27, benefits of Ansys acquisition, and n-t IP misses at Intel/China could remain a persistent overhang on the stock,” the note said.
“We downgrade SNPS to Underperform from Buy on: 1) surprising restructuring required in its core IP business, muted FY26 growth and unspecified change in business model including potentially more competition with ARM, 2) persistent uncertainty of foundry potential at top customer INTC (historically ~12% of sales), 3) higher initial integration costs of ~$35bn Ansys acquisition,” analysts wrote.
“Furthermore, SNPS is seeing a greater shift to more customized IP which could provide TAM upside … but requires n-t IP library adjustment resulting in a muted FY26 IP outlook for SNPS.”
Bank of America added that investor positioning in the stock looks “very crowded.”
It contrasted Synopsys with rival Cadence Design Systems, which it called its top pick in electronic design automation.
“We believe the problems outlined by SNPS are company specific as they have relied far more on IP than peer CDNS … who has higher TSMC exposure, stronger HW, stronger profitability, lower stock comp., and avoidance of large M&A.”