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Cadence (CDNS) Hits 52-Week High on Strong Product Adoption

Zacks

Shares of Cadence Design Systems Inc CDNS have rallied to a new 52-week high of $40.33, eventually closing a bit lower at $40.25 on Oct 4.

The momentum can be attributed to the strong adoption of the company’s products and expanding customer base, which drove top-line growth. In the last quarter, revenues increased 5.7% year over year to $479 million, beating the Zacks Consensus Estimate of $478 million.

Moreover, Cadence has outperformed the Zacks Consensus Estimate for earnings in two of the trailing four quarters with a positive average of 1.62%.

Currently, Cadence has a Zacks Rank #3 (Hold). Notably, the stock has a market capital of $11.06 billion.

Further, Cadence’s stock has returned 59.6% year to date, substantially outperforming the 25.4% rally of the industry it belongs to.



Strong Product Adoption, New launches: Key Catalysts

Cadence is benefiting from strong adoption of products like Palladium Z1, S1 FPGA-based prototyping system, Vinovus and Tensilica. Most recently, the company’s Genus Synthesis solution was selected by Fuji Xerox Co. Ltd. to improve the development of its multi-functional printer SoCs.

Additionally, the launch of the company’s design integration platform Virtuoso system is a positive.

Recently, Cadence launched Conformal Smart Logic Equivalence Checker (LEC), which delivers an average of 4 times runtime improvement compared with the previous generation of logic equivalency checking tools with the same compute resources.

The company also launched Allegro PCB DesignTrue DFM technology, the industry's first solution to perform real-time, in-design design-for-manufacturing (DFM) checks integrated with electrical, physical and spacing design rule checks (DRCs).

We also believe that increasing investments on emerging trends like Internet-of-things (IoT), augmented and virtual reality (AR/VR) and autonomous vehicle sub-systems presents significant growth opportunity for the company in the long haul.

In this regard, Cadence’s set of Design for Manufacturing (DFM) tools are now qualified on Samsung Electronics' 28nm FD-SOI/14nm/10nm process technologies. This will enable customers to develop complex, advanced-node designs for the automotive, mobile, IoT, high-performance compute (HPC) and consumer markets.

Moreover, the company’s full-flow digital and signoff tools and custom/analog tools are now certified for Intel’s INTC 22FFL process.

Collaborations Expanding Product Portfolio

Cadence also collaborated with TSMC to advance 7nm FinFET Plus design innovation for mobile and HPC platforms.

Moreover, the company announced that it is building the first Cache Coherent Interconnect for Accelerators (CCIX) test chip by using TSMC 7nm FinFET process technology. For this, Cadence is partnering with Xilinx XLNX, Arm and TSMC.

CCIX will allow various system components to access and process data irrespective of where it resides and without the need for complex programming environments. By using the existing server interconnect infrastructure, CCIX will deliver higher bandwidth, lower latency and cache coherent access to shared memory. The company expects to deliver the test chip in early 2018.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2017 has remained steady at $1.39 over the last 30 days. The estimate for fiscal 2018 has also been steady at $1.51 over the same time frame.

Stock to Consider

Adobe Systems Inc ADBE with Zacks Rank #1 (Strong Buy) is a stock worth considering in the same sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long term earnings growth for Adobe is currently pegged at 16.60%.

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