Cadence Design Stock Drops Despite Strong Q4, Analysts See Upside

Shares of Cadence Design Systems Inc CDNS were trading lower on Wednesday, despite the company reporting upbeat fourth-quarter results.

The results came in amid an exciting earnings season. Here are some key analyst takeaways.

Piper Sandler On Cadence Design Systems

Analyst Clarke Jeffries reaffirmed an Overweight rating, while raising the price target from $318 to $328.

Cadence Design Systems reported fourth-quarter revenues at $1.356 billion, representing 27% year-on-year growth and beating the midpoint of guidance, Jeffries said in a note. The company's non-GAAP operating margins of 46.0% and earnings of $1.88 per share were also higher than the guidance midpoints, he added.

Cadence Design Systems ended 2024 with a record backlog of $6.8 billion, "driven by broad-based strength across all businesses and AI tailwinds to the product portfolio," the analyst wrote. While the 2025 revenue guidance of $5.180 billion missed consensus of $5.23 billion, the revenue assumptions "could rise as the year progresses," he further stated.

Check out other analyst stock ratings.

Stifel On Cadence Design Systems

Analyst Ruben Roy reiterated a Buy rating and price target of $350.

Cadence Design Systems delivered fourth-quarter results that were "above consensus across all key metrics," Roy said. Management expects no growth in China revenue in 2025 "due to a lack of visibility into the macro and geopolitical environment," he added.

The midpoints of their full-year sales and adjusted earnings guidance of $5.18 billion and $6.70 per share came below consensus estimates of $5.23 billion and $6.80 per share, respectively, the analyst stated. Cadence Design Systems typically begins the year with a conservative guidance and may raise it as the year progresses, given "continued robust design activity across broad markets and recent hardware momentum, coupled with record backlog," he further wrote.

Needham On Cadence Design Systems

Analyst Charles Shi maintained a Buy rating and price target of $325.

Cadence Design Systems reported record backlogs of $6.8 billion, implying more than $2.5 billion of net bookings in the fourth quarter, Shi said. "Management partly attributed the bookings strength to a few large deals," with companies like Nvidia Corp NVDA, Qualcomm Inc QCOM and Marvell Technology Inc MRVL, he added.  

"The average contract duration is extended to the high end of the historical range of 2.4 to 2.6 years, likely due to the large contracts skewing the average," the analyst wrote. Management expects bookings activity to decelerate and backlogs to decline in the first half of 2025 before renewals in the back half of the year, he further stated.

CDNS Price Action: Shares of Cadence Design Systems were down 11.6% to $265.45 at the time of publication on Wednesday.

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