Synopsys Trades In Buy Zone Ahead Of Earnings | Investor’s Business Daily

Synopsis: (SNPS) has rallied into the 5% buy zone ahead of Aug. 17 earnings and is trading at an all-time high. This IBD 50 Stock to Watch has been running higher since July and has extended gains so far this month.


This leading chip design software maker has trended higher since second-quarter earnings on May 18. Shares broke out above a 342.69 double-bottom buy point in late July and notched gains of 21% for the month.

SNPS stock is extended above its 50-day moving average, with shares up an additional 5% in August, and may be overdue for a pause before continuing higher. Ideally, stocks will trade less than 10% above this key moving average when investors start to build exposure.

Synopsys broke out above a proper 377.70 buy point on Aug. 8 and are now crossing the 5% buy zone, adding another 0.6% in Monday’s market.

The relative strength line has powered higher, alongside strong price action, and is nearing a new high. The stock has also carved a recent series of up weeks on strong volume, another bullish sign.

Synopsys shows excellent mutual fund ownership, with top players loading up, as well as rising quarterly fund ownership in recent quarters. For the quarter ending June 30, total fund ownership reached 2564, up from 2180 in the same quarter last year.

Synopsys In Fast-Growing Tech Segment

Synopsys makes chip design software as well as tools to ensure quality and security in software applications. There has been notable industry strength among firms in the Electronic Design Automation (EDA) business. Synopsys’ EDA division provides customers with the tools to design their own chips.

Many software and technology firms that previously bought chips from third parties have shifted to designing them in-house. Allied Market Research now predicts the EDA market will grow from $11.5 billion in 2020 to $20.8 billion in 2027.

The firm is well positioned to profit from the increasing complexity of the semiconductor industry, as well as other key trends such as artificial intelligence, high-performance computing and custom chip designs.

Synopsys Earnings Preview:

Synopsys will report third-quarter earnings on Aug. 17. In addition to IBD 50 and Big Cap 20 membership, SNPS stock is also a Long-Term Leaders component, alongside industry peer Cadence Design Systems (CDNS).

The Mountain View, Calif.-based company raised its outlook for the current quarter and full fiscal year on May 18. In the upcoming report, the company is expected to post EPS of $1.99 per share on revenue of $1.21 billion. Analysts are also looking for full-year EPS of $8.51, representing 24% growth, according to MarketSmith. The firm has averaged 40% earnings growth over the past three quarters.


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