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Valued at a market cap of $87.5 billion, Cadence Design Systems, Inc. (CDNS) provides a comprehensive suite of software, hardware, and intellectual property (IP) solutions that help customers design electronic products. The San Jose, California-based company’s product portfolio includes tools for custom and digital Integrated Circuits (IC) design, functional verification, system design and analysis, and IP offerings such as Tensilica DSPs for audio, vision, and AI applications.
This software company has underperformed the broader market over the past 52 weeks. Shares of CDNS have gained 10.9% over this time frame, while the broader S&P 500 Index ($SPX) has soared 12.5%. However, on a YTD basis, the stock is up 6.6%, outpacing SPX’s 1.4% return.
Narrowing the focus, CDNS has also lagged behind the iShares Expanded Tech-Software Sector ETF’s (IGV) 24.5% rise over the past 52 weeks. Nonetheless, it has outperformed the ETF’s 4.8% uptick on a YTD basis.
Shares of CDNS surged 5.8% on the following day after its Q1 earnings release on Apr. 28. The company posted revenue of $1.2 billion, which advanced 23.1% from the year-ago quarter and met the consensus estimates. Meanwhile, its adjusted EPS improved 34.2% year-over-year to $1.57 and topped the analyst expectations by 5.4%. The strong results were driven by broad-based growth across all its reportable segments, supported by sustained customer demand for its products and services. Moreover, noting the positive momentum, the company raised its fiscal 2025 guidance, and now expects revenue to be between $5.15 billion and $5.23 billion, and adjusted EPS in the range of $6.73 to $6.83.
For the current fiscal year, ending in December, analysts expect CDNS’ EPS to grow 18.4% year over year to $5.33. The company’s earnings surprise history is mixed. It topped the consensus estimates in three of the last four quarters, while missing on another occasion.
Among the 18 analysts covering the stock, the consensus rating is a “Strong Buy” which is based on 15 “Strong Buy,” one “Moderate Buy,” one “Hold,” and one “Strong Sell” rating.
This configuration is slightly more bullish than a month ago, with 14 analysts suggesting a “Strong Buy” rating.
On May 16, Joseph Quatrochi from Wells Fargo & Company (WFC) maintained a “Buy” rating on CDNS with a price target of $365, which indicates a 14% potential upside from the current levels.
The mean price target of $325.33 represents a 1.6% premium from CDNS’ current price levels, while the Street-high price target of $375 suggests an upside potential of 17.1%.
