Synopsys, Inc. (SNPS.US) posts stable Q4 performance and outlook for 2026 fiscal year, prompting multiple Wall Street major banks to raise target price, with the highest target price now raised to $600!

On Thursday, electronic design automation and IP supplier Synopsys, Inc. (SNPS.US) released its fourth quarter performance and outlook for the 2026 fiscal year, showing stable business trends and receiving positive evaluations from multiple Wall Street institutions along with target price upgrades. Bank of America Corp upgraded Synopsys from a "neutral" rating to a "buy" rating, raising the target price significantly from $500 to $560. Analyst Vivek Arya stated that the mitigation of business risks related to Intel Corporation (INTC.US), along with strong growth from Ansys, positions the company to achieve potential stock price gains and outperform future earnings expectations. He noted that while the 2026 fiscal year revenue guidance roughly aligns with market estimates at $9.6 billion (with $2.9 billion from Ansys, implying core SNPS growth of around 8% year-over-year after excluding the $110 million divestiture impact), the midpoint earnings per share (EPS) guidance of $14.36 is significantly higher than the market's expected $14.11, even with a 200 basis point tax rate increase being a headwind of approximately $0.35. Needham also maintained a "buy" rating and raised the target price from $550 to $580. Analysts Charles Shi and Denis Pyatchanin pointed out that the company's guidance for the first quarter of the 2026 fiscal year is slightly below market expectations, but for companies releasing year-end results, "next year's guidance is what investors will be focusing on." They believe that previously, the market expected the company to provide challenging financial forecasts after completing a large acquisition, but Synopsys delivered guidance that was essentially in line with or slightly better than expectations, which was a pleasant surprise. On a business front, the company anticipates double-digit growth for Ansys in the 2026 fiscal year; EDA growth is expected to remain below 10% for the third consecutive year due to industry-wide slowdown; and IP business continues to face challenges from specific wafer factory customers, resulting in subdued performance. KeyBanc also maintained a "overweight" rating and raised the target price from $575 to $600. Analyst Jason Celino noted that the company's full-year operating margin (OM) guidance is around 40.5%, with an EPS range of $14.32 to $14.40, significantly better than the market's consensus expectations of 38.9% and $13.87, respectively. He emphasized that considering the additional dilutive impact from recent investments by NVIDIA Corporation (NVDA.US), the EPS guidance is particularly impressive. KeyBanc attributed this to the $600 million in revenue from the sale of OSG/PowerArtist and the rapid reduction of interest expenses from NVIDIA Corporation's $2 billion investment accelerating debt repayment, as well as benefiting from cost-cutting and cost synergy effects. Wells Fargo & Company maintained a "neutral" rating but raised the target price from $445 to $500. Analysts Joe Quatrochi and Travis Poulin believe that the company's preliminary guidance for the 2026 fiscal year is a mix of both positive and negative aspects, with Ansys revenue expected to reach $2.9 billion, surpassing their expectations, but implying that EDA growth may be lower than previously thought. They estimate core EDA growth for the 2026 fiscal year to be between 7% and 8%, lower than their prior forecast of 8.5% and also below the market's approximately 10% expectation. Meanwhile, IP revenue is expected to remain weak. Wells Fargo & Company stated that they will continue to monitor the company's key growth drivers, including Ansys synergistic solutions, Agentic AI development, and improvements in the Chinese business base effect to potentially accelerate overall growth.