Last week saw the newest third-quarter earnings release from Synopsys, Inc. (NASDAQ:SNPS), an important milestone in the company's journey to build a stronger business. Revenues were US$1.5b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$2.61 were also better than expected, beating analyst predictions by 14%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the 17 analysts covering Synopsys are now predicting revenues of US$6.94b in 2025. If met, this would reflect a modest 7.1% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to step up 10% to US$10.89. Before this earnings report, the analysts had been forecasting revenues of US$6.89b and earnings per share (EPS) of US$10.65 in 2025. So the consensus seems to have become somewhat more optimistic on Synopsys' earnings potential following these results.
There's been no major changes to the consensus price target of US$644, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Synopsys analyst has a price target of US$694 per share, while the most pessimistic values it at US$490. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Synopsys' revenue growth is expected to slow, with the forecast 5.6% annualised growth rate until the end of 2025 being well below the historical 14% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. Factoring in the forecast slowdown in growth, it seems obvious that Synopsys is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Synopsys following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$644, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Synopsys going out to 2026, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Synopsys , and understanding this should be part of your investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
