Cadence Design Systems (CDNS) secures its position as this week's Big Cap 20 stock, poised within a buy zone, as it continues to lead the pack in the artificial intelligence (AI) sector.
The company specializes in developing cutting-edge hardware and software solutions for designing electronic systems, semiconductor chips, and electronic devices. Its AI platform and data analytics environment play a crucial role in various industries, including 5G systems, aerospace, defense, life sciences, consumer electronics, and automotive.
According to Anirudh Devgan, president, and CEO, the increasing demand for generational trends such as AI, high-performance computing (HPC), and autonomous driving continues to drive robust design activities within Cadence.
Cadence's innovative technology is notably featured in Tesla's (TSLA) Cybertruck, where it collaborated with the electric vehicle giant to design Full Self Driving and DOJO AI chips for car navigation and computer vision.
Currently, Cadence stock holds the No. 2 spot out of 12 stocks in the design software group, which has significantly climbed in the IBD industry groups ranking from 101 to 42 in just four weeks.
In terms of stock performance, Cadence stock is in a 5% buy zone, with a flat base reaching to 293.29 and a 279.32 buy point, according to MarketSmith pattern recognition. The stock broke out on Jan. 19 in above-average volume and has maintained tight closes, potentially setting up for a bullish three-weeks-tight pattern.
Despite experiencing a brief downturn in early January due to rising Treasury yields affecting the broader tech sector, Cadence stock has demonstrated resilience and recovered as Treasury yields retreated.
Cadence's third-quarter earnings report surpassed expectations, with earnings growth accelerating to 19% from the prior two quarters and sales growth ranging from 13% to 14% in the same period. Analysts project continued growth with 19% full-year EPS growth expected for 2023 and 17% for 2024.
With a noteworthy Earnings Stability Rating of 3, indicating a stable earnings history, and an Accumulation/Distribution Rating of B+, Cadence stock remains an attractive investment option. Mutual funds continue to show interest, with 58% ownership, signaling confidence in the company's growth prospects.
Investors eagerly await Cadence's fourth-quarter and full-year results on Feb. 12, expecting further insights into its impressive performance and continued growth trajectory in the AI sector.
