Cadence Design Systems: Trailing Behind but Showing Signs of Recovery
With a market cap of $82.2 billion, Cadence Design Systems, Inc. (CDNS) specializes in providing software, hardware, services, and reusable integrated circuit (IC) design blocks. This California-based firm focuses on supporting electronic systems and semiconductor customers in designing innovative electronic products.
Stock Performance: A Year of Underperformance
Over the past 52 weeks, Cadence’s stock has struggled compared to the broader market. The company’s shares have risen by 11.7%, while the S&P 500 Index ($SPX) enjoyed a remarkable 31.1% increase during the same period. Year-to-date, CDNS shares gained 10%, significantly lower than the SPX’s nearly 24.1% return.
Comparison with Sector Trends
When evaluated against the Technology Select Sector SPDR Fund (XLK), which recorded a gain of about 26.6% in the last year, Cadence’s performance seems to lag further. On a year-to-date basis, XLK has posted a 20.2% return.
Recent Earnings Boost Stock Value
The primary reason behind Cadence’s recent underperformance has been its slowing growth in previous quarters. Nonetheless, following a positive Q3 earnings announcement on Oct. 28, shares rallied by 12.5%. The adjusted earnings per share (EPS) rose by 30.2% year over year to $1.64, surpassing Wall Street’s expectations of $1.44. Additionally, revenue reached $1.22 billion, also exceeding estimates of $1.18 billion, marking an 18.8% increase from the previous year.
Future Earnings Outlook
Looking ahead, analysts project that CDNS’s EPS will rise nearly 20% year over year to $4.75 for the current fiscal year ending in December. However, Cadence’s record of earnings surprises has been mixed; it has beaten estimates in two of the last four quarters and missed on two occasions.
Analyst Ratings and Price Targets
According to 16 analysts covering the stock, the consensus rating stands at “Strong Buy.” This classification includes 12 “Strong Buy,” one “Moderate Buy,” two “Hold,” and one “Strong Sell” rating.
Investment Recommendations
On Oct. 29, Baird reaffirmed its “Overweight” rating for CDNS and increased the price target to $340, which would represent a 13.5% upside from current levels. The average price target stands at $316, indicating a 5.5% increase from the current price. The highest target from analysts, set at $360, suggests a potential upside of 20.1%.
On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are provided solely for informational purposes. For more information, please view the Barchart Disclosure Policy here. More news from Barchart
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