SNPS · Synopsys
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $534.56
Note written ·
Price against the kill line
14.8% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $534.56, on record since 10 November 2026. The shares are up 10.2% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $534.56, the highest close of the last 126 sessions (26 May 2026), would show the shares leading the S&P 500 and prove this call wrong.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Technology
Quarter to 31 July 2026, filed 26 August 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 2,477
- Revenue, change on a year (%)
- +42.4
- Gross margin (%)
- 72.6
- Operating margin (%)
- 14.4
- Free cash flow, four quarters ($M)
- 2,748
- Net cash, cash less debt ($M)
- −6,430
- Price to earnings (×)
- 81.0
- Enterprise value to sales (×)
- 9.9
All filed numbers
What Synopsys reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 2,477 | +42.4 | 72.6 | 14.4 |
| first filed | 2,276 | +41.9 | 72.3 | 5.3 |
| first filed | 2,409 | +65.5 | 73.5 | 8.4 |
| first filed | 2,255 | +37.8 | 71.0 | 5.4 |
| first filed | 1,740 | +14.0 | 78.1 | 9.5 |
| first filed | 1,604 | +10.3 | 80.2 | 23.5 |
| Pre-tax income ($M) | 684 |
| Net income ($M) four quarters: 1,077 | 546 |
| Diluted shares, change on a year (%) against the quarter to 31 July 2025 | +18.9 |
| Operating cash flow ($M) | 2,938 |
| Capital spending ($M) | 191 |
| Free cash flow ($M) | 2,748 |
| Cash and short-term investments ($M) | 3,608 |
| Debt ($M) long-term debt | 10,037 |
| Net cash, cash less debt ($M) | −6,430 |
| Deferred revenue ($M) +14.3% on a year | 2,715 |
| Backlog, orders not yet delivered ($M) +7.9% on a year | 10,900 |
| Receivables ($M) | 1,319 |
| Inventory ($M) | 479 |
| Shareholders' equity ($M) | 31,153 |
| Market value ($M) | 87,233 |
| Enterprise value, market value plus net debt ($M) | 93,663 |
| Enterprise value to sales (×) | 9.9 |
| Enterprise value to operating income (×) | 116.7 |
| Price to earnings (×) | 81.0 |
| Price to book value (×) | 2.8 |
| Free-cash-flow yield (%) | 3.1 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 3.4% of shares outstanding sold short, 2.2 days of average trading to cover, +30.3% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $51.4M |
| 12 monthsfrom | $0 | $61.5M |
The thesis
Synopsys' business case is intact and the price has recovered part of October's drop, but the fourth-quarter report on 8 December 2026 decides whether the fiscal 2027 revenue guide of $11.1–11.2 billion holds. The shares closed at $466.97 on 9 November 2026, 12.6% below the 52-week high of $534.56 and 10.5% above the 22 October 2026 low close of $422.48.
Synopsys announced on 5 November 2026 that it will report fourth-quarter and fiscal 2026 results on Tuesday 8 December 2026 after the market close, with a call at 5:00 p.m. Eastern. The quarter, which ended 31 October 2026, was guided at $2.53–2.58 billion in revenue and $4.10–4.16 in non-GAAP earnings per share (EPS).
The story is well known: the guide has been public since the 30 September 2026 investor day, and news since then is mostly follow-on items. Those include Rothschild & Co Redburn raising its target to $615 from $550 on 4 November 2026 and a company news headline on 3 November 2026 that Elliott Investment Management disclosed a stake. The Wall Street Journal first reported Elliott's multibillion-dollar position in March 2026.
Bullish and bearish views on Synopsys, Inc.
The bull case on Synopsys, Inc. (SNPS), in brief: guidance cleared consensus by a wide margin. The bear case: the October price break has not been recovered.
Bull case
- Guidance cleared consensus by a wide margin. On 30 September 2026 Synopsys guided fiscal 2027 revenue to $11.1–11.2 billion against a $10.73 billion consensus. It guided adjusted EPS to $19.04–19.12 against $17.32, according to Benzinga.
- Amazon contract adds royalty income. The Amazon deal announced 30 September 2026 is worth more than $1 billion over several years. It covers the Nitro, Graviton and Trainium chips under a license-plus-royalty model.
- The closest peer beat and raised. Cadence reported third-quarter 2026 revenue of $1.633 billion on 26 October 2026, up 22% year over year, and raised its 2026 outlook to 21% growth. Synopsys shares closed at $474.42 on 27 October 2026, up 4.4% on the session.
- An activist is on the register. The Wall Street Journal reported in March 2026 that Elliott holds a multibillion-dollar stake and wants Synopsys to earn more from its software and services. Company news on 3 November 2026 carried a headline that Elliott disclosed a stake.
- Analyst targets sit above the price. Redburn's target is $615 (4 November 2026). Morgan Stanley's is $574 (20 October 2026), Needham's $620 (12 October 2026), Rosenblatt's $620, KeyBanc's $605, Wells Fargo's $540 and HSBC's $700.
- Buyback and credit support. A $1 billion accelerated share repurchase with JPMorgan began 5 October 2026, with final settlement due by 5 January 2027. S&P Global Ratings raised Synopsys to BBB+ from BBB on 26 October 2026.
Bear case
- The October price break has not been recovered. The shares closed at $454.63 on 16 October 2026 and at $422.48 on 22 October 2026. The 9 November 2026 close of $466.97 is still below the early-October highs, when an insider sold at $500.00.
- An executive sold into the rally. Deputy chief financial officer Sudhindra Kankanwadi sold 3,000 shares at $484.78 on 5 October 2026 and 9,170 shares at $500.00 on 6 October 2026 after exercising options. The SEC Form 4 does not mark a Rule 10b5-1 plan.
- The guide is only weeks old. A fiscal 2027 range set on 30 September 2026 and cut on 8 December 2026 would damage the case. Consensus at the time was $10.73 billion, so the guide sits well above what the market expected.
- Leverage policy loosened. S&P noted on 26 October 2026 that management dropped its target of net leverage below 1x and plans to put as much as 50% of cash flow into buybacks.
- China exposure is back in the story. Nikkei Asia reported on 8 October 2026 that Synopsys wants to work with Chinese AI labs on chip design. US export rules restricted chip-design software sales to China in May 2025.
- GAAP and adjusted earnings differ widely. Amortization from the 2025 Ansys acquisition and stock compensation account for most of the gap.
Price setup
The last close was $466.97 on 9 November 2026, and the 14-day relative strength index (RSI) was 55.5. Benzinga flagged RSI readings above 70 on 7 October 2026; momentum has cooled since. The shares are up 13.3% over three months, mostly from the 10.8% jump on 1 October 2026.
Levels that matter are the $474.42 close on 27 October 2026, the $500.00 insider sale price on 6 October 2026, the 52-week high of $534.56 and the 22 October 2026 low close of $422.48. Crowding evidence is the imminent earnings date, the open-market insider sales in October and a disclosed activist holder. Retail attention is not measured here. The accelerated repurchase ends by 5 January 2027, so share retirement continues through the report.
Catalysts ahead
- 8 December 2026: Q4 and full-year fiscal 2026 results after market close; call at 5:00 p.m. Eastern. Shows whether revenue lands in the $2.53–2.58B guide, whether the $11.1–11.2B fiscal 2027 range holds and whether Amazon royalty revenue appears.
- 9 December 2026: First trading session after the fourth-quarter report. Sets the price reaction to the guide and to any update on buybacks or the Elliott holding.
What would change the view
A daily close above $534.56, the highest close of the last 126 sessions (26 May 2026), would show the shares leading the S&P 500 and prove this call wrong.
What it trades with
Synopsys trades with Cadence, its direct peer. The two rose and fell together around Cadence's 26 October 2026 report. Both also respond to chip-stock sentiment and to the 10-year Treasury yield, which was 5.25% on 1 October 2026 per Benzinga. Ansys, acquired in July 2025, ties part of Synopsys' revenue to industrial simulation spending, so cyclical industrial demand matters alongside AI chip design.
The evidence, claim by claim (8)
- Synopsys will report fourth-quarter and fiscal 2026 results on 8 December 2026 after market close, with a call at 5:00 p.m. Eastern. Synopsys press release via PR Newswire, 5 November 2026 · as of
- Synopsys guided fiscal 2027 revenue to $11.1–11.2B and adjusted EPS to $19.04–19.12, against consensus of $10.73B and $17.32. Synopsys investor day release; Benzinga 30 September 2026 · as of
- The fourth-quarter fiscal 2026 guide is $2.53–2.58B in revenue and $4.10–4.16 in non-GAAP EPS. Q3 FY2026 earnings release (8-K exhibit 99.1) · as of
- Rothschild & Co Redburn raised its Synopsys price target to $615 from $550. Company news 4 November 2026 · as of
- Cadence reported Q3 2026 revenue of $1.633B, up 22% year over year, and raised its 2026 outlook to 21% revenue growth. Cadence Q3 2026 8-K exhibit 99.1 · as of
- Synopsys began a $1B accelerated share repurchase with JPMorgan, receiving about 1,735,000 shares initially, with final settlement by 5 January 2027. Synopsys press release 5 October 2026 · as of
- Deputy CFO Sudhindra Kankanwadi sold 3,000 shares at $484.78 on 5 October 2026 and 9,170 shares at $500.00 on 6 October 2026; the filing does not mark a 10b5-1 plan. SEC Form 4, Synopsys · as of
- Elliott Investment Management took a multibillion-dollar stake in Synopsys, first reported in March 2026; a stake-disclosure headline appeared 3 November 2026. Wall Street Journal via Yahoo Finance, March 2026; company news 3 November 2026 · as of
Sources
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