Synopsys (SNPS) has a more balanced risk-reward profile as investors look to its fiscal 2026 outlook to help repair sentiment following recent intellectual property weakness, BofA Securities said in a note Monday.
The brokerage said the company's 2026 guidance, expected to be discussed on the upcoming Dec. 10 earnings call, is the key near-term catalyst for improving sentiment, particularly after weakness in its China and Intel-related IP business.
The firm cited several potential positives, including Nvidia's proposed $2 billion equity investment, the possibility that Intel (INTC) could win more foundry business at its 18A and 14A nodes, and a wider-than-usual valuation gap versus Cadence (CDNS). BofA also noted the stock's catch-up potential after lagging peers year-to-date.
Risks highlighted by the firm include integration challenges tied to Ansys, weakness in China-related IP demand and export restrictions, and uncertainty around the timing of targeted cost and revenue synergies.
Investors will be looking for clarity around IP recovery and progress toward the company's targeted $400 million of Ansys-related cost synergies, according to the note.
BofA reduced its fiscal 2026 and fiscal 2027 EPS estimates by about 4% while keeping revenue forecasts largely unchanged.
The firm upgraded Synopsys to neutral from underperform but lowered its price objective to $500 from $525, citing uncertainty around the timing and realization of cost synergies tied to its Ansys integration.
Price: 464.21, Change: -2.55, Percent Change: -0.55
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