Synopsys stock is Thursday's pick for IBD 50 Growth Stocks To Watch. SNPS stock is in a buy zone out of a flat base as it's coming off its all-time high. The moves come as Synopsys expands a key partnership with Arm Holdings.
Synopsys provides electronic design and verification automation software used to make semiconductors. Further, its technology is used in smart products in the automotive, financial, government, health care, aerospace-defense and tech industries.
On Tuesday, Synopsys announced a new partnership with Arm Total Design, a chip development ecosystem designed by U.K.-based Arm. Arm had its initial public offering on Sept. 14.
Synopsys ranks No. 1 out of 12 stocks in Investor's Business Daily's computer software design group. Also, the group ranks No. 67 out of the 197 industry groups IBD tracks.
Synopsys Stock In A Buy Zone
SNPS stock is in a 5% buy zone that reaches to 491.43. Shares are emerging from a flat base with a buy point of 468.03.
The stock rallied following news that the company acquired automotive software testing and verification company PikeTec on Aug. 23. At that point, shares reclaimed their 50-day moving average. SNPS stock climbed steadily and flirted with the buy point, but a breakout attempt failed in early September and the stock deteriorated.
SNPS stock got a 3.1% lift in heavy volume and retook the 50-day line on Sept. 28 after the company announced Ann Minooka would be its new chief marketing officer. Then, shares jumped on Oct. 6, pushing it back into the buy zone.
That started a five-day rally in heavy trading to an all-time of 502.66 on Oct. 12, before pulling back modestly and starting to trade more tightly. Synopsys stock has gained around 52% this year.
Earnings Growth Expected To Continue
Synopsys reported better-than-expected earnings and sales for its fiscal third quarter on Aug. 16. The company also reignited its earnings growth as profits grew 37% following three quarters of single-digit gains. Similarly, quarterly sales jumped grew 19%, up from 9% and 7% gains the prior two quarters.
"We achieved another record quarter as semi design starts and R&D investments continue, unabated, to capitalize on the AI-driven, 'Smart Everything' era," Synopsys Chief Executive Aart de Geus said in the company's earnings release.
Analysts now project full-year fiscal 2023 earnings growth of 26%, followed by 20% in fiscal 2024. Meanwhile, its fiscal year ends in October.
Synopsys holds an impressive Earnings Stability Rating of 5, meaning the company has proven stable earnings performance over the last three to five years.
Mutual funds own 58% of shares with 3,078 funds holding the stock in September, up from 3,051 in the June quarter and 2,887 reported in March.
Further, Synopsys stock is held by five IBD Mutual Fund Index names with MFS Growth Fund A and Fidelity Contrafund adding shares in the September quarter.
Finally, SNPS stock holds a top-notch 99 IBD Composite Rating and a 96 Relative Strength Rating.
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