Cathie Wood Just Bought the Dip in Synopsys Stock. Should You?
Synopsys (SNPS) shares collapsed nearly 36% on Sept. 10 — the worst one-day drop since the company went public — after the firm reported third-quarter results the day prior. The company’s Q3 results missed expectations and included weak guidance for the coming period. Investors’ concerns also rose as Synopsys cautioned that U.S. export restrictions are driving a slowdown in China, the biggest semiconductor market.
While design automation saw an improvement during the period, that wasn’t enough to outweigh the disappointments. However, despite the sharp pullback, Cathie Wood’s ARK Invest bought approximately 15,742 shares of Synopsys on Sept. 10 across its ARK Autonomous Technology & Robotics ETF (ARKQ) and ARK Space Exploration & Innovation ETF (ARKX), spending around $9.5 million. This signals that the veteran investor sees the drop in SNPS stock as a buying opportunity amid broader secular tailwinds in semiconductor design and AI.
Synopsys is a leading software company specializing in electronic design automation (EDA) and semiconductor intellectual property (IP). Headquartered in California, the company provides tools and services for designing, verifying, and testing integrated circuits, system-on-chips, and related software systems. Synopsys has grown to be one of the prominent players in its field and boasts a market capitalization of $79 billion.
SNPS stock has seen a dramatic deterioration in its share price recently. Following the day the firm reported Q3 2025 earnings, the stock plunged 35.8% on missed expectations and weak forward guidance. The slide erased much of its gains for 2025. SNPS stock is currently down 26% from its 52-week high of $651.73, which was reached on July 30. SNPS stock is down 1% on a year-to-date (YTD) basis and down 3% over the past 52 weeks.
Synopsys stock currently trades at 54.67 times forward earnings, which is above the sector median.
Synopsys released its Q3 fiscal 2025 results on Sept. 9. During the period, the company reported revenue of $1.7 billion, up 14% year-over-year (YOY). Non-GAAP earnings per share came in at $3.39, slightly down from $3.43 in the same period a year earlier and missing the consensus estimate.
The Design Automation segment performed well, boosted in part by the recent acquisition of Ansys. However, the Design IP business declined, in part due to issues such as export restrictions, weakening demand, and troubles with a large foundry customer. Design Automation revenue rose 23.5% YOY to $1.3 billion, while Design IP revenue declined 7.7% to $427.6 million.
Furthermore, Synopsys provided its Q4 outlook. For the period, the firm expects revenue in the range of $2.2 billion and $2.3 billion, and non-GAAP EPS of $2.76 to $2.80. For the full fiscal year 2025, it narrowed its non-GAAP EPS expectation to the range of $12.76 to $12.80, down from earlier guidance of $15.11 to $15.19.
Analysts predict EPS to be around $7.79 for fiscal 2025, down 24% YOY, before surging by 16% annually to $9.05 in fiscal 2026.
Last week, Needham analyst Charles Shi lowered his price target on Synopsys to $550 from $660, while maintaining a “Buy” rating. The analyst pointed out that Synopsys’ recent quarter was mixed, with notable weakness in the IP segment, contributing significantly to the downside. Still, while Shi acknowledged continued pressures in the short term, the analyst believes these headwinds will eventually subside.
Rosenblatt also downgraded Synopsys from “Buy” to “Neutral,” cutting its price target to $605 from $650. The firm cited weaker-than-expected performance in the company’s IP business.
Wall Street remains moderately bullish on SNPS stock. Overall, SNPS has a consensus “Moderate Buy” rating. Of the 20 analysts covering the stock, 13 advise a “Strong Buy,” one suggests a “Moderate Buy,” four recommend a “Hold” rating, one has a “Moderate Sell,” and one has a “Strong Sell” rating.
The average analyst price target for SNPS is $570.79, indicating potential upside of 19%. The Street-high target price of $715 suggests that the stock could rally as much as 46% from current levels.
On the date of publication, Subhasree Kar did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com