Key Takeaways
- HSBC elevated Synopsys (SNPS) to Buy from Hold in Thursday’s note.
- Price objective increased to $700 from $490, representing the highest target on Wall Street.
- Current share price of $424.91 suggests approximately 65% potential gain to target.
- HSBC projects fiscal 2027 earnings of $20.01 per share, exceeding consensus by 13%.
- Bullish thesis centers on artificial intelligence adoption in EDA tools and transition to royalty revenues.
Synopsys (SNPS) shares changed hands at $424.91 following HSBC’s decision to elevate its stance to Buy from Hold on Thursday. The investment bank simultaneously increased its price objective to $700 from its previous $490 mark.
Stephen Bersey, the covering analyst, arrived at the new target by applying a 35x price-to-earnings multiple to HSBC’s fiscal 2027 earnings projection of $20.01 per share. This forecast stands 13% higher than the Street’s consensus view and represents the most optimistic EPS outlook among covering analysts.
The $700 price objective suggests potential appreciation of approximately 65% from present trading levels. As reference, Synopsys currently commands a P/E ratio of 75.
HSBC revised its valuation methodology to focus on fiscal 2027 projections, departing from its previous fiscal 2026-based model that utilized a 33x earnings multiple.
The Bull Case From HSBC
HSBC analyst Frank Lee outlined a “new business model” that has the potential to reposition Synopsys “from a slow-growth software play to a high-growth AI beneficiary.”
Lee highlighted the company’s design IP licensing combined with royalty structure. He also emphasized the integration of agentic artificial intelligence within electronic design automation platforms as a catalyst for earnings expansion.
The semiconductor software provider is transitioning away from its traditional “build once, sell many” strategy. Instead, it’s pursuing closer partnerships with chip manufacturers, delivering customized silicon solutions.
“It shifts Synopsys up the value chain by combining licensing revenue with royalties,” Lee noted. He anticipates this will broaden the company’s addressable market as revenues become linked to semiconductor production volumes.
This approach would serve clients including hyperscalers, ASIC producers, and foundries. Lee projects the royalty income stream will significantly enhance profitability.
Agentic AI as a Game Changer
Lee also views agentic AI as fundamentally transforming EDA tool capabilities. Rather than merely supporting engineers, these platforms may soon autonomously handle complete design workflows.
Synopsys is apparently evaluating a departure from conventional subscription licenses for human users. The firm is considering subscription-plus-consumption frameworks designed specifically for AI agents.
This evolution could enable agents to assume greater engineering responsibilities. It could also allow them to coordinate underlying EDA platforms at significantly accelerated rates.
InvestingPro data reveals 16 analysts have increased their earnings projections for the next period. The company also maintains impressive gross profit margins of 83%, per the same source.
Some InvestingPro analysis indicates the stock may be overvalued compared to its Fair Value calculation, a consideration given the elevated valuation multiple HSBC is employing.
This represents just one of several recent positive assessments on Synopsys. Benchmark maintained its Buy rating following the company’s second-half fiscal 2026 performance, characterizing it as a beat-and-raise quarter.
Baird likewise elevated Synopsys to Outperform from Neutral, pointing to favorable fiscal 2027 growth prospects and establishing a $560 price target. Morgan Stanley upgraded shares to Overweight from Equalweight as well, citing growing conviction around the Ansys acquisition integration and Design IP segment recovery.
These upgrades arrived after Synopsys’s fiscal third-quarter 2026 performance exceeded Street projections. The company delivered non-GAAP earnings of $3.91 per share with revenue reaching $2.48 billion, surpassing expectations of $3.67 per share and $2.44 billion in sales. Synopsys elevated its full-year guidance following those results.
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