Synopsys stock price has dropped and is nearing a correction phase after falling by 8.35% from its highest point this year. It has dropped to $598 and formed a highly bullish pattern ahead of its quarterly results on Tuesday.
Synopsys to release its earnings
Synopsys is one of the biggest companies in the United States with a market capitalization of over $100 billion. It is a relatively unknown company to most people because it offers its solutions to some of the biggest companies in sectors like semiconductors, automotive, and consumer electronics.
The company makes software in the electronic design automation (EDA) and semiconductor intellectual property industries. It is one of the top companies used by some major firms in the AI space like Intel, TSMC, Samsung, Micron, NVIDIA, Qualcomm, Broadcom, and AMD.
It has been one of the best-performing companies in Wall Street as its stock has jumped from $198 in 2020 to $600 today. Its market capitalization has jumped from $29 billion in 2020 to over $100 billion today.
Synopsys growth has happened both organically and through acquisitions, with the most recent one being Ansys, which it acquired in a $35 billion deal that closed in July.
The most recent results showed that Synopsys revenue growth continued in the second quarter as demand from key industries like software and other tech names. Its revenue rose to $1.6 billion, at the midpoint of its guidance.
The next important catalyst for the SNPS stock will be the upcoming financial results, with its revenue coming in at $1.7 billion, a 15.8% increase from the same period last year. The most optimistic analyst expects the revenue to come in at $1.81 billion m
Analysts then expect the upcoming results to have a third-quarter guidance of $2.59 billion, a 58% increase from the same period last year. This growth will be substantial as they will include the acquisition of Ansys.
Analysts also see the annual revenue coming in at $7.4 billion, followed by $10.45 billion in the coming year, making it one of the fastest-growing players in the technology space. Most importantly, the synergies from its Ansys buyout will boost its profitability, with analysts expecting its earnings per share (EPS) rising to $14.58 and $16.6, respectively.
The company seems to be fairly valued, with the forward price-to-earnings ratio being at 37, lower than other slow-growing companies in the technology industry.
Synopsys stock price analysis
The daily chart shows that the SNPS stock price has jumped from a low of $365 in April this year to $600 today.
It has formed a descending channel in the past few weeks. This channel is part of the formation of the bullish flag pattern, which is a popular continuation sign.
Synopsys stock price has moved above the important support level at $593, the highest swing in December last year.
The stock moved above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control.
Therefore, the stock will likely have a strong bullish breakout, with the next key level to watch being at $650, its highest level this month, which is about 9% above the current level. A drop below the support at $570 will invalidate the bullish forecast.
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