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Cadence Design (CDNS) Hits 52-Week High on Solid Q3 Results


Shares of Cadence Design Systems, Inc. CDNS rallied to a 52-week high of $44.69, eventually closing a tad lower at $44.67 on Nov 13.

The share price momentum has been largely driven by the company’s impressive third-quarter results. The company reported earnings of 35 cents per share for third-quarter 2017, beating the Zacks Consensus Estimate by a penny. The figure surged 17% on a year-over-year basis and was in line with the upper end of the guided range of 33–35 cents per share.

Revenues increased 9% year over year to $485 million, beating the Zacks Consensus Estimate of $482 million. The top line also met the high end of management’s expectation.

Cadence Design stock has gained 77.1% year to date, substantially outperforming the 36% rally of the industry it belongs to.

Key Factors

Accelerated adoption of Cadence’s digital, signoff, custom-analog and IP solutions has been a huge positive for the company.

During the quarter, Quantenna Communications adopted the company’s flagship products — Genus Synthesis, Innovus Implementation and Tempus. Cadence’s extended partnership with a prominent memory chip maker in Asia for LPDDR4, PCI Express Gen4, NAND flash PHYs and Tensilica DSPs, is also a key driver.

The newly launched Protium S1 FPGA-based prototyping system is also gaining widespread traction as evident from 17 purchases of the product during the third quarter, including nine repeat orders.

Notably, the company delivered an IP portfolio for the automotive design of Taiwan Semiconductor Manufacturing Company TSM 16nm FinFET Compact (16FFC) technology and also collaborated with it for design innovation of 7nm FinFET Plus for high-performance computing (HPC) systems.

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

Zacks Rank and Key Picks

Cadence has a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader technology sector are NVIDIA Corp. NVDA and Intel Corporation INTC, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for NVIDIA and Intel is projected to be 11.2% and 8.4%, respectively.

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