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Valued at a market cap of $68.3 billion, Cadence Design Systems, Inc. (CDNS) provides software, hardware, services, and reusable integrated circuit (IC) design blocks. The California-based company serves customers across various industries, including hyperscale computing, 5G communications, mobile, automotive, aerospace and defense, industrial, and life science.
Companies worth more than $10 billion or more are generally described as “large-cap stocks,” and Cadence Design Systems fits right into that category. The company is a pivotal leader in computational software and is renowned for its electronic systems design and Intelligent System Design strategy, which helps it deliver software, hardware, and IP to turn design concepts into reality.
The chip validation tools maker is down 23.8% from its 52-week high of $328.99, hit on Jun. 20. CDNS has declined 15.4% over the past three months, lagging behind the broader Nasdaq Composite’s ($NASX) slight decline over the same time frame.
Longer term, CDNS stock is down 7.9% on a YTD basis, lagging behind NASX’s 14.1% gains. Moreover, shares of Cadence Design Systems have gained 2.2% over the past 52 weeks, underperforming NASX’s 22.2% return over the same time frame.
CDNS has been trading below its 200-day and 50-day moving average since mid-July, indicating a bearish trend.
Despite benefiting from the AI boom, CDNS’ underperformance is primarily driven by softer short-term sales expectations, high valuation premiums, and increased competition in the industry. However, the stock rose 2.6% after its better-than-expected Q2 earnings release on Jul. 22, benefiting from broad-based customer demand and robust design activity owing to transformative generational trends such as hyperscale computing, 5G, and autonomous driving. But, management’s narrowed EPS, operating margin, and cash flow guidance for 2024 dampened investor confidence, causing the stock to fall 1.4% the next day.
Nevertheless, CDNS has slightly underperformed its rival, Synopsys, Inc.'s (SNPS) 7.6% decline on a YTD basis, but slightly outpaced SNPS' nearly 2% gain over the past 52 weeks.
Despite CDNS’ underperformance relative to the broader market, analysts remain optimistic about its prospects. The stock has a consensus rating of “Strong Buy” from the 13 analysts covering the stock, and the mean price target of $329.92 suggests a 31.5% premium to its current levels.
On the date of publication, Sohini Mondal 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.
