Tumbling to a price of $506.64 during today's morning trading session, shares of Synopsys are now -21.23% below their average target price of $643.18. Does this mean the stock will reverse course? Analysts are giving SNPS an average rating of buy and target prices ranging from 496.12 to 707.78 dollars per share.
The market seems to share this rosy outlook, since Synopsys has a short interest of only 1.9%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
Another way to gauge the sentiment on Synopsys is to look at the percentage of institutions that are invested in the stock. In this case, 94.1% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
Overall, there is positive market sentiment towards Synopsys because of an analyst consensus of strong upside potential, a buy rating, a very low short interest, and a significant number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about SNPS:
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It has trailing 12 month earnings per share (EPS) of $9.68 per share
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Synopsys has a trailing 12 month Price to Earnings (P/E) ratio of 52.3 while the S&P 500 average is 29.3
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The company has a Price to Book (P/B) ratio of 10.1 in contrast to the S&P 500's average ratio of 4.74
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Synopsys is a Technology company, and the sector average P/E and P/B ratios are 30.01 and 3.91 respectively
