/Cadence%20Design%20Systems%2C%20Inc_%20logo%20on%20building-by%20JHVEPhoto%20via%20Shutterstock.jpg)
San Jose, California-based Cadence Design Systems, Inc. (CDNS) is a leading provider of electronic design automation (EDA) software, hardware, and intellectual property (IP) solutions. Valued at a market cap of $66.7 billion, the company enables customers to develop advanced semiconductor chips, systems-on-chip (SoCs), and electronic systems across various industries, including consumer electronics, automotive, aerospace, and telecommunications.
Companies worth $10 billion or more are typically classified as “large-cap stocks,” and CDNS fits the label perfectly, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the software - application industry. The company benefits from long-term relationships with major chip manufacturers and technology firms, ensuring a steady demand for its solutions. Its focus on artificial intelligence, machine learning, and cloud-based design further enhances its competitive edge.
Despite its notable strength, this tech giant has slipped 26.1% from its 52-week high of $328.99, reached on Jun. 20, 2024. Moreover, it has declined 21% over the past three months, underperforming the broader Technology Select Sector SPDR Fund’s (XLK) nearly 10.5% loss over the same time frame.
In the longer term, CDNS has fallen 23.6% over the past 52 weeks, considerably lagging behind XLK’s 2.4% gain. Moreover, on a YTD basis, shares of CDNS are down 19.1%, compared to XLK’s 7.3% decrease over the same time frame.
To confirm its recent bearish trend, Cadence has been trading below its 200-day moving average since mid-February, and has remained below its 50-day moving average since early January, with some fluctuations.
On Feb. 18, CDNS released its Q4 earnings results. It posted adjusted earnings of $1.88 per share, which climbed 36.2% from the year-ago quarter and topped the consensus estimates of $1.82. Its revenue advanced 26.8% year-over-year to $1.4 billion and marginally exceeded the forecasted figure.
However, despite delivering better-than-expected Q4 results, Cadence shares dropped 8.8% the following day as investor sentiment was dampened by its 2025 outlook, which indicated a slowdown in revenue growth. The company expects revenue between $5.1 billion and $5.2 billion and took a cautious stance on its China market, anticipating flat revenue from the region.
Cadence’s underperformance becomes more evident when compared to its rival, ANSYS, Inc. (ANSS), which declined 4.2% over the past 52 weeks and 3.7% on a YTD basis.
Despite CDNS’ recent underperformance relative to its broader sector, analysts remain highly optimistic about its prospects. The stock has a consensus rating of “Strong Buy” from the 18 analysts covering it, and the mean price target of $324.94 suggests a massive 33.6% premium to its current levels.
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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
