Morgan Stanley upgrades Synopsys as it turns selective on chip stocks

Synopsys (SNPS) shares have rebounded over 30% since September, driven by a $1B+ deal with Amazon (AMZN) and a partnership with OpenAI. The Amazon deal focuses on Synopsys' IP business, with royalties expected to grow. The OpenAI collaboration aims to accelerate chip development. Synopsys raised its FY2030 revenue growth outlook to mid-teens CAGR and adjusted operating margin to 50%.

Synopsys (SNPS) stock rose 28% in a month, outpacing the S&P 500, after updating growth targets and partnering with OpenAI. Q3 2026 revenue grew 8.5% for chip design tools, with total revenue at $2.477B, including $711M from Ansys. Management expects double-digit growth in Q4, driven by AI demand. Operating margin is 11.0%, below the S&P 500's 18.5%, with $10B in debt. Cash flow forecast raised to $2.8B, and $1B stock buyback announced.

Synopsys (SNPS) has initiated a $1 billion accelerated share repurchase agreement with JPMorgan Chase. The deal includes an initial delivery of 1.735 million shares, with the remainder to be settled by January 5, 2027. The final share count will be based on the average daily share price during the repurchase period, minus a discount.

Argus raised its price target for Synopsys (SNPS) to $571.00. The company provides electronic design automation software and intellectual property products, which aid in chip design. This update reflects an analyst's view on the company's potential.

Synopsys (SNPS) announced a multiyear, $1B+ deal with Amazon to expand the use of its EDA, IP, and AI-based engineering tools for custom silicon. The agreement aligns with Synopsys' AI-centric roadmap and long-term financial goals. Analysts highlight potential demand visibility and capital allocation influences, while noting risks like Ansys integration and litigation. Current earnings are $1.1B, with forecasts for $2.6B by 2029, implying 13% yearly revenue growth.

Synopsys (SNPS) raised its long-term growth targets at an investor day, prompting analysts to increase price targets. Deutsche Bank raised its target to $640. The company cited a $1B Amazon deal and AI-driven demand for chips. Management expects mid-teens revenue growth, 50% operating margin by 2030, and mid-20% EPS/FCF growth.