KeyBanc raises Cadence Design stock price target to $358 on reduced China risk

Investing.com - KeyBanc Capital Markets has raised its price target on Cadence Design Systems (NASDAQ:CDNS) to $358.00 from $340.00 while maintaining an Overweight rating on the stock. The company, currently valued at $87.4 billion, has demonstrated robust performance with impressive gross profit margins of 85.86% and revenue growth of 19.55% over the last twelve months. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.

The firm cited renewed conviction as the risk of a "doomsday scenario" involving a full China ban appears to be "largely in the rear-view." KeyBanc expects management to provide further details on the financial impact from the China ban during the upcoming second-quarter earnings report.

The analyst firm expressed hope that Cadence will disclose a specific dollar amount headwind, which would help investors better understand the second-quarter performance excluding China-related impacts. KeyBanc noted it would be "partially lenient" regarding any impact to the business outside China, considering the "considerable selling distractions" during the final six weeks of the quarter.

KeyBanc indicated it remains "biased to the upside" and will be looking for strength in intellectual property, system design and analysis, and hardware segments in the quarterly results. The firm believes investors will now largely look past the China debate. InvestingPro subscribers can access 15+ additional investment tips and a comprehensive analysis of Cadence’s financial health, which is currently rated as GREAT.

Along with the Cadence price target increase, KeyBanc also raised its price target on Synopsys (NASDAQ:SNPS) to $610 from $540, maintaining an Overweight rating on that stock as well.

In other recent news, Cadence Design Systems announced the industry’s first LPDDR6/5X memory IP solution, designed to meet the growing demands of AI and high-performance computing. This new system can operate at 14.4Gbps, significantly faster than previous generations, and is now available for customer engagements. Additionally, the Bureau of Industry and Security of the U.S. Department of Commerce has rescinded export license requirements for certain Cadence electronic design automation software in China, allowing the company to restore access to its affected technology.

Cadence also expanded its collaboration with Samsung (KS:005930) Foundry through a new multi-year agreement to develop advanced memory and interface IP solutions. This partnership aims to leverage AI-driven design flows for cutting-edge process nodes. Furthermore, Cadence will provide its engineering design solutions on an industrial AI cloud developed with NVIDIA (NASDAQ:NVDA), which will utilize 10,000 NVIDIA Blackwell GPUs to enhance performance.

In analyst news, Goldman Sachs initiated coverage of Cadence with a Buy rating, highlighting the company’s potential for long-term growth driven by custom chip design and a strong demand for its intellectual property offerings. Despite the positive outlook, Goldman Sachs noted potential risks related to China export restrictions. These developments underscore Cadence’s ongoing efforts to innovate and expand its market presence across various sectors.

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