JPM upgrades Cadence, sees over 20% upside amid strong chip design trends

Investing.com -- JP Morgan upgraded Cadence Design (NASDAQ:CDNS) Systems to "Overweight" from "Neutral" amid the recent stock underperformance. It notes a rising demand for chip design tools that position the company for consistent outperformance and more than 20% upside to its new price target.

The firm set a December 2026 price target of $325, up from $300, saying Cadence shares are appealing at a forward P/E multiple of 34x, near the low end of its five-year range.

The stock is down 12% year-to-date, lagging peers and the broader group’s 20% gain in 2024.

JP Morgan highlighted the company’s resilient business model, modest valuation, and record $6.8 billion backlog exiting 2024 as key reasons for the upgrade.

It added that Cadence’s conservative 11–12% revenue growth guidance for 2025 leaves room for upside from strong chip design activity and market share gains, particularly in leading-edge digital design.

“We believe near/midterm business trends remain solid and de-risked,” JP Morgan wrote, pointing to continued growth in AI and accelerated compute chip design programs, as well as strong demand for its IP and third-generation hardware.

Cadence has consistently exceeded its initial revenue forecasts, averaging beats of 1.5%–4% over recent years.

JP Morgan expects this pattern to continue, supported by reshoring initiatives, new ASIC customers, and a growing addressable market.