Morgan Stanley upgrades Synopsys stock rating on Ansys integration

Morgan Stanley has raised its rating on Synopsys stock to Overweight from Equalweight, signaling increased confidence in the company. The brokerage firm set a price target of $500.00 for Synopsys (NASDAQ:SNPS). This shift occurred after Morgan Stanley deemed it appropriate to reassess Synopsys' profitability due to the integration with Ansys.

The investment firm identified the potential strategic importance of co-design offerings in the company's future growth. Morgan Stanley has gained confidence in the positive impact of Ansys integration and the recovery of Design IP. The company has demonstrated strong financial performance, with revenue growth of 46% over the past year and a gross profit margin of 83%.

Synopsys currently trades below its Fair Value, making it an attractive investment opportunity. The firm emphasized the company's potential in assessing thermal dynamics, mechanical stress, and fluid dynamics. Analysts expect Synopsys to showcase its Design IP recovery and Ansys synergies during the upcoming investor day. The company's focus is on the new Factory 2 IP model, tailored for hyperscalers and ASIC makers requiring customized solutions.

Synopsys launched Multiphysics Fusion, a joint solution with Ansys, in the third quarter. The brokerage firm sees upside potential in Synopsys, with management possibly providing updated revenue synergies. Synopsys recently reported fiscal third-quarter 2026 results, exceeding analyst expectations with non-GAAP earnings of $3.91 per share and revenue of $2.48 billion.

Benchmark reaffirmed its Buy rating on Synopsys, praising the company's strong performance in the second half of fiscal 2026. Baird also upgraded Synopsys to Outperform from Neutral, citing a promising growth outlook for fiscal 2027 and raising its price target to $560.