Cadence Design Systems is rebounding from the 50-day moving average on Thursday, according to IBD MarketSmith. Strong results from rival Synopsys lifted the stock. Cadence, an AI stock, is today's selection for IBD 50 Stocks To Watch.
A bullish outlook and quarterly results from Nvidia aided the tech sector, too.
Cadence stock fell after fourth-quarter results were announced Feb. 12, but the stock found support at the 50-day line. With support emerging this week, the stock has a new buy zone from 285.70 to about 300. Shares are a bit extended and are near their all-time high of 315.70.
Sales and earnings growth have been steady over the past seven quarters. Fourth quarter sales rose 19% to $1.1 billion while earnings per share of $1.38 increased 44% — the best gain in at least seven quarters.
For the current quarter, the design software provider expects $996 million in revenue with earnings of $1.12 per share at the midpoint. For the full year, its outlook suggests sales of $4.58 billion at the midpoint with earnings per share of $5.92.
On Wednesday, rival Synopsys reported sales of $1.6 billion and $3.56 in earnings per share. Earnings topped the high end of the company's guidance. Cadence stock soared in sympathy as Synopsys gapped up from the 50-day moving average.
Cadence Stock 2nd In Group, Has Nvidia Partnership
Cadence makes software and hardware that companies use to designs chips that are used in mobile phones, medical devices, autonomous driving systems and more. The company has been using artificial intelligence tools to make its design software more efficient while also automating certain design tasks.
Cadence stock ranks second in the design software group. The stock has strong technical and fundamental ratings. The Composite Rating is 97 while the EPS Rating is nearly ideal at 98. The Relative Strength Rating of 88 is good, too.
The software and hardware design and automation play provides its tools for Nvidia's graphics processor chips that have to perform at high speeds. Cadence also offers a software platform for data centers.
On the earnings call, Nvidia stated that "demand will continue to be stronger than supply provides." That is clearly good news for advanced chip design software makers such as Cadence.
Mutual funds own 57% of shares outstanding. More funds have been net buyers of Cadence over the past seven quarters. Recent buys by funds have also earned the stock an Accumulation/Distribution Rating of B-.
The Harbor Disruptive Innovation Fund (HAMGX) and the MFS Growth Fund (MFEGX) hold Cadence stock.
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