Strong Growth and Positive Long-Term Outlook Justify Buy Rating for Cadence Design Systems

Analyst Vivek Arya of Bank of America Securities reiterated a Buy rating on Cadence Design (CDNS – Research Report), retaining the price target of $330.00.

Vivek Arya’s rating is based on the strong growth potential of Cadence Design Systems, which is a leading supplier in the Electronic Design Automation (EDA) industry. Arya highlights the company’s exposure to structural growth trends, such as the increasing adoption of artificial intelligence, digitalization, 3D chip designs, and advanced packaging. Even though there was a quarterly revenue dip, which was anticipated due to the timing of revenue recognition and challenging comparisons with the previous year, the long-term outlook remains positive. The report projects a robust growth trajectory through 2024, with significant acceleration expected in the second half of the year, leading to an impressive fourth-quarter year-over-year growth rate.

The Buy rating is also supported by Cadence Design’s strong backlog, the successful ramp-up of their AI products, and IP growth. Arya notes a record $6 billion backlog, with future benefits from high-renewal-rate AI products. The Cadence.AI platform is gaining considerable traction with prominent customers, and the company’s IP business has shown an 8% year-over-year growth, further bolstered by a partnership with Intel Foundry. Although there are risks, such as uneven hardware sales and challenges in the China market, Arya seems confident that the company’s strengths and market position will prevail, justifying the $330 price objective.

In another report released today, KeyBanc also maintained a Buy rating on the stock with a $340.00 price target.

Based on the recent corporate insider activity of 124 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of CDNS in relation to earlier this year.

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Cadence Design (CDNS) Company Description:

California-based Cadence Design Systems, Inc. is a multinational computational software company, founded in 1988 by the merger of SDA Systems and ECAD, Inc. The company designs and develops integrated circuits and electronic devices. Its products are used for various market applications including consumer, hyperscale computing, 5G communications, automotive, aerospace, industrial and health.