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San Jose, California-based Cadence Design Systems, Inc. (CDNS) is a prominent provider of software, hardware, and reusable integrated circuit design blocks worldwide. With a market cap of $88.9 billion, its electronic design automation (EDA) software aids in developing ICs, while System Connect tools and System Integration solutions support PCB design, analysis, and system functionality verification.
Companies valued at $10 billion or more are generally considered "large-cap" stocks, and Cadence fits this criterion perfectly, exceeding the mark. Cadence Design Systems offers a diverse product portfolio for integrated circuit design, ensuring stable revenue and a strong brand image. The company’s heavy investment in R&D keeps it innovative and competitive.
Even though Cadence sits slightly below its 52-week high of $327.36, achieved on March 21, shares of Cadence Design have gained 8.5% over the past three months, outperforming the broader S&P 500 Index's ($SPX) 6.6% returns over the same time frame.
In the longer term, CDNS is up 19.9% on a YTD basis, outpacing SPX's 15% gains. Moreover, CDNS stock has surged 38.4% over the past 52 weeks, compared to SPX's 24.4% returns over the same time frame.
To confirm the bullish price trend, CDNS has consistently traded above its 200-day moving average and remained mostly above its 50-day moving average with a few fluctuations.
Cadence Design's remarkable stock price performance over the past year can be largely attributed to its asset-light business model, scale advantages, and strong competitive positioning, allowing the company to return capital to shareholders or reinvest in the business while maintaining a healthy cash balance.
However, CDNS stock declined 2.8% in the following three trading sessions after the company reported its Q1 earnings results on April 22. Its non-GAAP EPS of $1.17 exceeded projections by 3.5%, but revenue of $1 billion aligned with the estimates. Despite ending Q1 with a record $6 billion backlog, the lower Q2 guidance led to the stock's decline. The company projected Q2 revenue to range between $1.03 billion and $1.05 billion, while EPS is expected to be between $1.20 and $1.24, below analysts' expectations of $1.1 billion in revenue and $1.43 EPS.
However, rival Synopsys, Inc. (SNPS) is outperforming not just CDNS but also the broader equity benchmarks. Over the past 52 weeks, SNPS has soared 40.6% and gained 20.5% on a YTD basis.
In light of Cadence Design's recent stock performance and market leadership, analysts remain optimistic about the stock's prospects. CDNS stock has a consensus rating of “Strong Buy" from the 14 analysts covering it, and its mean price target of $327.54 reflects a marginal potential upside from the current market prices.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
