Synopsis (SNPS) rallied to the 5% buy zone ahead of the Aug. 17 results and is trading at an all-time high. This stock to watch IBD 50 has been rising since July and has extended its gains so far this month.
This leading chip design software maker has been trending higher since second-quarter results on May 18. The shares passed a double buy point of 342.69 in late July and posted gains of 21% for the month.
SNPS stock is extended above its 50-day moving average, with shares up another 5% in August, and could be overdue for a break before continuing higher. Ideally, stocks will trade within 10% above this key moving average when investors start gaining exposure.
Synopsys broke above a suitable buy point of 377.70 on August 8 and is now crossing the 5% buy zone, adding another 0.6% to Monday’s market.
The relative strength line has risen alongside strong price action and is approaching a new high. The stock has also seen a recent string of bullish weeks on high volume, another bullish sign.
Synopsys is showing excellent mutual fund ownership, with top players loading, as well as an increase in quarterly fund ownership in recent quarters. For the quarter ending June 30, total fund ownership reached 2,564, compared to 2,180 in the same quarter last year.
Synopsys in the fast growing technology segment
Synopsys manufactures chip design software as well as tools to ensure the quality and security of software applications. There has been notable industry strength among companies in the Electronic Design Automation (EDA) sector. Synopsys’ EDA division provides customers with the tools to design their own chips.
Many software and technology companies that previously purchased chips from third parties have moved to designing them in-house. Allied Market Research now forecasts that the EDA market will grow from $11.5 billion in 2020 to $20.8 billion in 2027.
The company is well positioned to take advantage of the growing complexity of the semiconductor industry, as well as other key trends such as artificial intelligence, high performance computing and custom chip design.
Overview of Synopsys Earnings
Synopsys will release its third quarter results on August 17. Besides joining IBD 50 and Big Cap 20, SNPS stock is also among the long-term leaders, alongside its peers Cadence Design Systems (CNDS).
The Mountain View, Calif.-based company raised its outlook for the current quarter and full fiscal year on May 18. In the next report, the company is expected to post EPS of $1.99 per share on revenue of $1.21 billion. Analysts are also looking for annual EPS of $8.51, up 24%, according to MarketSmith. The company has posted average earnings growth of 40% over the past three quarters.
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