Key Highlights HSBC elevated Synopsys (SNPS) from Hold to Buy in a Thursday note. Price target increased to $700 from $490, representing the highest on Wall Street. The new target suggests ap
Synopsys (SNPS) shares are currently priced at $424.91 following HSBC’s decision to elevate its stance to Buy from Hold on Thursday. The investment bank simultaneously boosted its price objective to $700 from the previous $490 mark.
HSBC analyst Stephen Bersey arrived at the revised target by applying a price-to-earnings multiple of 35 times the firm’s fiscal 2027 earnings per share projection of $20.01. This forecast stands 13% higher than the Street consensus, positioning it as the most optimistic EPS estimate among Wall Street analysts.
The $700 price objective represents potential appreciation of approximately 65% from present trading levels. As a reference point, Synopsys currently commands a P/E ratio of 75.
HSBC recalibrated its valuation methodology to focus on fiscal 2027 projections, departing from its previous fiscal 2026 framework that employed a 33 times earnings multiple.
HSBC analyst Frank Lee outlined a “new business model” with the potential to redefine Synopsys “from a slow-growth software play to a high-growth AI beneficiary.”
Lee highlighted the company’s design IP licensing-plus-royalty framework. He also emphasized the integration of agentic AI capabilities within electronic design automation as a significant catalyst for earnings expansion.
The semiconductor design firm is departing from its traditional “build once, sell many” strategy. Instead, it’s embracing deeper partnerships with semiconductor manufacturers, delivering customized silicon solutions tailored to specific client needs.
“It shifts Synopsys up the value chain by combining licensing revenue with royalties,” Lee noted. He anticipates this will broaden the company’s total addressable market as revenues become directly linked to chip production volumes.
This strategic approach would focus on customers including hyperscalers, ASIC producers, and semiconductor foundries. Lee projects the royalty-based revenue component will deliver substantial margin enhancement.
Lee also anticipates agentic AI will fundamentally transform the functionality of EDA platforms. Rather than merely supporting engineers, these advanced tools may soon autonomously handle complete design workflows.
Synopsys is allegedly evaluating a departure from conventional subscription licenses designed for human engineers. The firm is considering subscription-plus-consumption frameworks optimized for AI agents operating independently.
This evolution could enable AI agents to assume greater engineering responsibilities. It may also allow them to coordinate underlying EDA systems at significantly accelerated rates compared to human-driven processes.
InvestingPro data reveals that 16 analysts have recently raised their earnings projections for the upcoming period. The company also boasts gross profit margins reaching 83%, per the same source.
Certain InvestingPro assessments indicate the stock may be trading above its Fair Value calculation, a consideration worth factoring in given the elevated valuation multiple HSBC is utilizing.
HSBC’s call isn’t an isolated bullish perspective on Synopsys lately. Benchmark maintained its Buy recommendation following the company’s second-half fiscal 2026 performance, characterizing it as a beat-and-raise quarter.
Baird similarly raised Synopsys to Outperform from Neutral, referencing an encouraging growth trajectory for fiscal 2027 and establishing a $560 price objective. Morgan Stanley also upgraded the stock to Overweight from Equalweight, highlighting enhanced confidence in the Ansys merger integration and Design IP segment recovery.
These analyst upgrades come on the heels of Synopsys’s fiscal third-quarter 2026 performance, which exceeded Wall Street projections. The company delivered non-GAAP earnings of $3.91 per share alongside revenue of $2.48 billion, surpassing analyst expectations of $3.67 per share and $2.44 billion in sales. Synopsys subsequently elevated its full-year guidance following that quarterly announcement.
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