HSBC upgrades Synopsys to Buy with a $700 price target

HSBC upgraded Synopsys to Buy from Hold and raised its price target to a Street-high $700 from $490. The new target implies more than 60% upside from current trading levels. Shares of the chip design software maker rose 1.81% intraday on Friday by 10:20 a.m. ET following the report.

The bank based its $700 target on a 35 times multiple of its fiscal 2027 earnings-per-share estimate of $20.01. This moves its valuation forward from 33 times fiscal 2026. According to HSBC, its fiscal 2027 estimate is the highest on Wall Street and sits 13% above consensus.

HSBC highlighted that Synopsys is shifting its business model toward royalties, which it expects will drive earnings growth. The bank also noted that agentic artificial intelligence is increasing demand for electronic design automation tools.

The upgrade follows Synopsys's fiscal third quarter results, where it posted non-GAAP earnings of $3.91 per share on revenue of $2.48 billion. Both metrics exceeded Wall Street estimates of $3.67 per share and $2.44 billion in revenue. The company also raised its full-year outlook.