Synopsys (SNPS) Stock: HSBC Upgrades to Buy on AI Growth Outlook

TLDR

• HSBC upgraded Synopsys (SNPS) to Buy from Hold on Thursday.
• New price target set at $700, up from $490, described as street-high.
• Target implies roughly 65% upside from the current price of $424.91.
• HSBC’s fiscal 2027 EPS forecast of $20.01 sits 13% above consensus.
• Upgrade cites AI-driven EDA growth and a shift toward a royalty-based business model.

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Synopsys (SNPS) stock is trading at $424.91 after HSBC raised its rating to Buy from Hold on Thursday. The firm also lifted its price target to $700 from $490.

Synopsys, Inc., SNPS

Analyst Stephen Bersey set the new target using a price-to-earnings multiple of 35 times the firm’s fiscal 2027 earnings per share estimate of $20.01. That estimate sits 13% above Wall Street consensus, making it the highest EPS forecast on the Street.

The $700 target implies upside of roughly 65% from current levels. For context, Synopsys stock currently trades at a P/E ratio of 75.

HSBC shifted its valuation approach to fiscal 2027 estimates, moving away from its prior fiscal 2026 framework that used a 33 times multiple.

Why HSBC Is Bullish

HSBC analyst Frank Lee described a “new business model” that could transform Synopsys “from a slow-growth software play to a high-growth AI beneficiary.”

Lee pointed to Synopsys’s design IP licensing-plus-royalty model. He also flagged agentic AI integration in electronic design automation as a key driver of earnings upside.

The company is moving away from a “build once, sell many” approach. It’s shifting toward deeper collaboration with semiconductor companies, offering custom silicon solutions instead.

“It shifts Synopsys up the value chain by combining licensing revenue with royalties,” Lee wrote. He expects this to expand the company’s total addressable market as revenue becomes tied to chip volumes.

This model would target customers like hyperscalers, ASIC vendors, and foundries. Lee expects the royalty revenue stream to be highly margin accretive.

The Agentic AI Angle

Lee also sees agentic AI reshaping how EDA tools function altogether. Instead of simply assisting engineers, these tools could soon manage entire workflows on their own.

Synopsys is reportedly exploring a shift from traditional subscription licenses for human engineers. The company is looking at subscription-plus-consumption models built for AI agents instead.

That transition could let agents take on more engineering work. It could also let them orchestrate underlying EDA tools at a much higher rate than before.

Data from InvestingPro shows 16 analysts have revised their earnings estimates upward for the upcoming period. The company also maintains gross profit margins of 83%, according to the same data.

Some InvestingPro analysis suggests the stock appears overvalued relative to its current Fair Value estimate, worth noting given the stretched valuation multiple HSBC itself is applying.

This isn’t the only positive call on Synopsys recently. Benchmark reaffirmed its Buy rating after the company’s second-half fiscal 2026 results, calling it a beat-and-raise quarter.

Baird also upgraded Synopsys to Outperform from Neutral, citing a positive growth outlook for fiscal 2027 and setting a $560 price target. Morgan Stanley upgraded the stock to Overweight from Equalweight too, pointing to increased confidence in the Ansys integration and Design IP recovery.

The upgrades follow Synopsys’s fiscal third-quarter 2026 results, which beat Wall Street expectations. The company posted non-GAAP earnings of $3.91 per share on revenue of $2.48 billion, topping estimates of $3.67 per share and $2.44 billion in revenue. Synopsys raised its full-year outlook following that report.