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California-based Cadence Design Systems, Inc. (CDNS) is a leading player in the electronic design automation (EDA) industry, with a market cap of $76.7 billion. The company caters to various sectors, including consumer electronics, automotive, and aerospace.
Shares of this chip design software firm have slightly underperformed the broader market over the past 52 weeks. CDNS has gained 26.5% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 27.8%. In 2024, CDNS has risen with a 4.5% YTD return, trailing behind SPX's 17.8% gain.
Narrowing the focus, CDNS stock has fallen short of the North American Tech-Software iShares ETF's (IGV) 27.6% return over the past 52 weeks and a 7.5% increase on a YTD basis.
CDNS has underperformed over the past year due to softer sales expectations for the short term and high valuation premiums. Despite benefiting from the AI boom, increased competition and market challenges have contributed to its relative lag in performance. However, shares of Cadence Design Systems surged 2.6% on Jul. 22 after the company reported better-than-expected Q2 earnings results but fell 1.4% the next day as investors reacted negatively to the forecasted Q3 revenue and earnings per share being below Wall Street estimates.
Nevertheless, for the current fiscal year, ending in December, analysts expect CDNS' EPS to grow 19.4% year over year to $4.73. The company's earnings surprise history is mixed. It beat the consensus estimates in two of the last four quarters while missing on two other occasions.
Among the 13 analysts covering the stock, the consensus rating is a “Strong Buy.” That’s based on 10 “Strong Buy” ratings, one “Moderate Buy,” and two “Holds.”
This configuration is slightly more bullish than three months before, with nine analysts suggesting a "Strong Buy."
On Aug. 15, Bank of America Securities analyst Vivek Arya maintained a "Buy" rating on Cadence Design Systems with a $350 target price.
The mean price target of $329.92 represents a premium of 15.9% to CDNS' current levels. The Street-high price target of $355, set by KeyBanc's Jason Celino in June, suggests that the stock could rally as much as 24.8% from here.
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.
