Chip design software firm Synopsys impressed Wall Street analysts this week with its growth prospects at an investor day event. Analysts say Synopsys stock will benefit from the increased complexity of semiconductors amid the rise of artificial intelligence.
The Sunnyvale, Calif.-based company briefed analysts on Wednesday, the first day of its annual Synopsys User Group conference, known as SNUG.
After the event, KeyBanc Capital Markets analyst Jason Celino reiterated his overweight rating on Synopsys stock with a price target of 675. He called Synopsys "a core decade-long growth holding."
On the stock market today, Synopsys stock slid 1.3% to close at 594.20. For the week, Synopsys rose 8%.
Growth Factors For Synopsys
Synopsys has multiple growth opportunities, Celino said. They include three-dimensional integrated circuits, adoption of its AI software and synergies from its pending acquisition of Ansys, he said.
"As chip designs get more complex and industries such as server/AI and PC/client increasingly adopt 3D-IC, Synopsys estimates that by 2027, about 30% of EDA (electronic design automation) software TAM (total addressable market) will be on 3D-IC (multi-die) designs," Celino said in a client note. "With only about 15% of designs today on 3D-IC packaging, we maintain that the growth opportunity in 3D-IC is meaningful and is still underappreciated by investors."
Meanwhile, adoption of Synopsys' AI-powered design tools is in the early days, Celino said.
JPMorgan analyst Harlan Sur maintained his overweight rating on Synopsys stock with a price target of 650.
"Faster chip design introductions (accelerated by AI), exponential increase in chip design complexity, and move towards multi-die chiplet architecture are all driving continued solid demand for more and better chip design software tools and hardware verification platforms from Synopsys," Sur said in a client note.
Synopsys Stock Is On 3 IBD Lists
In other news, Synopsys completed its acquisition of Intrinsic ID, a provider of intellectual property for the design of systems-on-chip, or SOCs.
Synopsys has officially begun the process of selling its software integrity business. The unit, known as SIG, could fetch $3 billion or more, analysts say.
On Feb. 5, Synopsys stock broke out of a cup-with-handle base at a buy point of 554.57, according to IBD MarketSurge charts. Since then, it has pulled back four times, but found support at its 50-day moving average line each time.
Synopsys stock is now extended above the 5% buy zone of its breakout.
It spiked to a record high of 629.38 on Feb. 22 after the company posted results for its fiscal first quarter and guided higher than views for the current period.
Synopsys is on three IBD stock lists: IBD 50, Long-Term Leaders and Tech Leaders.
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