How should you play CDNS stocks as the US lifts export restrictions on cadence design systems?
The Cadence Design System (CDNS) opened comfortably in Green this morning after President Donald Trump’s administration removed restrictions from exporting chip design software to China.
The announcement could indicate that China is making significant progress by signing a trade agreement with the US.
Including today’s profit, CDNS stocks rose more than 40% in early April against the previous year’s low set.
The export restrictions on US chip design software are a meaningful tailwind for CDNS stocks as it restores the company’s access to key markets that accounted for around 12% of its revenue in 2024.
According to Cadence Design Systems, it is already working to restore sales and support to Chinese customers. This will stabilize revenues in the short term and remove the huge overhang that clouded investors’ sentiment.
For businesses whose tools are the basis for next-generation chip innovation, regaining access to one of the world’s largest semiconductor markets will likely prove to be nothing but change.
It’s this story that raises Cadence stock prices on Thursday.
The aforementioned announcement is particularly constructive for CDNS stocks, but investors need to be careful about investing in semiconductor software companies at the current level.
why? This is because it trades at nearly 58x multiples at the time of writing, making it significantly more expensive to own it at just 48x with Peer Synopsys (SNP) alone.
Also, overvaluation concerns led Belenberg analysts to lower the price target for Cadence stocks from $348 to $330 last week, indicating that the potential benefits from current levels are just 1%.
The Cadence Design System has broken street estimates for both profit and revenue for the most recent reported quarter. Still, Wall Street has not predicted a possible stock rise for the next 12 months.
According to Barchart, the consensus rating for Cadence stock remains in “strong buys,” but the average target of around $324 is slightly lower than the current trading price.