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Valued at $68.5 billion by market cap, Sunnyvale, California-based Synopsys, Inc. (SNPS) delivers trusted and comprehensive silicon-to-systems design solutions, from electronic design automation to silicon IP and system verification and validation.
Companies worth $10 billion or more are generally described as “large-cap stock,” Synopsys fits this bill perfectly. Given the company’s extensive customer base spanning various industries and its influence in the IC designing and testing market, its valuation above this mark is not surprising.
Despite its strengths, Synopsys stock has tanked 28.7% from its 52-week high of $624.80 touched on Jul. 11, 2024. Furthermore, the stock has plummeted 24.2% over the past three months, significantly underperforming the S&P 500 Index's ($SPX) 5.1% decline during the same time frame.
Synopsys’ performance has remained grim over the longer term as well. SNPS stock has plunged 6.7% over the past six months and 25.1% over the past 52 weeks, lagging behind SPX’s 4.7% gains over the past six months and 12.6% returns over the past year.
To confirm the bearish trend, SNPS has remained mostly below its 200-day moving average since early August 2024 and below its 50-day moving average since early December 2024 with some fluctuations.
Despite delivering better-than-expected financials, Synopsys’ stock prices declined 3.4% in the trading session after the release of its Q1 results on Feb. 26. While the company’s total revenues of $1.46 billion exceeded Street’s expectations, it was down 3.7% compared to the year-ago quarter. Synopsys’ revenues were primarily impacted due to the softness in the macro environment which led to a 17.2% decline in its Design IP segment’s revenues to $435.1 million.
Meanwhile, the company observed a notable surge in general & admin and other expenses which led to an even sharper decline in earnings. Its net income for the quarter tanked 34.2% year-over-year to $295.7 million. Furthermore, the company reported a negative $67.5 million cash flow from operations and reduced its full-year GAAP-based earnings guidance which shattered investor confidence.
Synopsys has also slightly underperformed its peer Cadence Design Systems, Inc.’s (CDNS) 24% decline over the past 52-week period.
Despite its poor financials and underperformance over the past year, analysts remain optimistic about the stock’s prospects. SNPS has a consensus “Strong Buy” rating among the 18 analysts covering the stock. Its mean price target of $638.22 suggests a 43.3% upside potential from current price levels.
