Company Reports

We are maintaining our $240 fair value estimate for narrow-moat Cadence Design Systems after the firm reported first-quarter results that missed our revenue estimate but delivered upside relative to our non-GAAP operating margin estimate. Cadence’s second-quarter guidance was below FactSet consensus on the bottom line, which likely led to the stock dropping by approximately 6% after hours, despite the firm essentially maintaining its full-year guidance for revenue and adjusted earnings per share. Nevertheless, we remain optimistic about the burgeoning adoption of electronic design automation tools driven by chip demand from artificial intelligence. With this, our long-term expectations remain intact. Despite the drop in share price, we still view the current stock as slightly overvalued.

We maintain our $42 fair value estimate for narrow-moat Bentley Systems for now, as Reuters reported April 18 that the company is exploring strategic options, including a possible sale of the business. We also maintain our $240 fair value estimate for narrow-moat Cadence Design Systems, which Reuters suggested is among the companies interested in acquiring Bentley. Shares of Bentley appear modestly overvalued to us on a fundamental basis if no deal were to go through. We continue to view Cadence as overvalued, independent of this news, and with no guarantee that Cadence will emerge as the winning bidder. Cadence's shares were down about 3% by noon, and we surmise that the market is reacting negatively to this report, as investors might fear that Cadence could potentially overpay for Bentley. Cadence will report earnings on Monday, April 22, so if it were to win the bid for Bentley, we wouldn't be stunned if the merger were to be consummated over the weekend and discussed in more detail Monday.

Cadence provides electronic design automation, or EDA, software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

We are raising our fair value estimate for narrow-moat Cadence Design Systems to $240 from $209. The firm reported fourth-quarter results that are mostly in line with our revenue and margin expectations while delivering upside on EPS. Cadence’s first-quarter forecast was below FactSet consensus estimates and was likely the culprit for the stock falling about 6% afterhours, while its forecast for 2024 was in line with consensus but modestly below our prior expectations. Our fair value increase comes from greater optimism around medium-term revenue growth as we factor in even greater electronic design automation adoption driven by chip demand from artificial intelligence. Despite our fair value increase, we continue to view the stock as overvalued.

Narrow-moat-rated Cadence Design Systems reported solid third-quarter results that continue to point to healthy demand for electronic design automation, or EDA, tools across a host of customers and end markets, but with an especially bright future in supporting artificial intelligence, or AI, and high-performance computing, or HPC, applications. Although the third-quarter results weren’t surprising, we reassessed our long-term revenue and earnings estimates and think we may have been too bearish on the rising tide of EDA adoption. Thus, we are raising our fair value estimate to $209 per share from $161. Shares fell a couple of percent after hours as fourth-quarter guidance was slightly below FactSet consensus estimates, but even with the selloff, we still view shares as modestly overvalued.

Cadence provides electronic design automation, or EDA, software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

We maintain our $161 fair value estimate for narrow-moat Cadence Design Systems after the firm delivered strong second-quarter results that were in line with guidance for revenue and ahead for adjusted EPS. With elevated demand for hardware solutions, management guided to a stronger second half of the year, involving a sequentially stronger third quarter on the top line and a higher full-year outlook. Secular trends such as generative artificial intelligence are supporting adoption for Cadence’s solutions as well as advancing the firm’s own digital, verification, and systems offerings. We were also pleased to see Cadence’s acquisition of Rambus businesses in the quarter, aimed at expanding its digital intellectual property portfolio. While shares were down around 5% afterhours, we view the current levels as overvalued as we think the market is too optimistic on the firm’s growth prospects.

Cadence provides electronic design automation, or EDA, software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Narrow-moat Cadence Design Systems delivered solid first-quarter results that met management’s expectation for revenue and exceeded guidance for adjusted EPS. Although management guided to sequentially lower second-quarter revenue, it was confident of a stronger second half of the year thanks to more software renewals relative to the first half. Secular trends such as generative artificial intelligence are supporting demand for Cadence’s products as well as enhancing the firm’s own digital, verification, and systems offerings. We maintain our $161 fair value estimate and view the shares as overvalued at current levels; we think the market is too optimistic on the firm’s growth prospects.

Cadence provides electronic design automation, or EDA, software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Narrow-moat Cadence Design Systems reported strong fourth-quarter results, with results exceeding management’s guidance. Secular trends in artificial intelligence/machine learning, 5G communications, and hyperscale computing continue to be a boon for Cadence and drive digital transformation throughout its end-markets. We maintain our thesis that Cadence is in a uniquely strong position to capitalize on two semiconductor design industry tailwinds: advancing technologies requiring system-level designs, packaging, and analysis and increasing software content for systems companies. When considering macroeconomic uncertainty along with our above-consensus expectations we are maintaining our $161 per share fair value estimate, and view shares as slightly overvalued after trading up to $191 after hours.

Narrow-moat Cadence Design Systems reported a strong third quarter, posting results exceeding management’s guidance and our at-consensus expectations. Cadence continues to benefit from secular trends toward hyperscale computing, 5G communications, and artificial intelligence/machine learning, which all possess intensified demand for computing complexity, connectivity, and storage capability. We believe Cadence holds a unique position to capitalize on two semiconductor design industry tailwinds: advancing technologies requiring system-level designs, packaging, and analysis and increasing software content for systems companies. We remain impressed with Cadence’s deployment of expertise across software and hardware solutions and view management’s raised outlook for fiscal 2022 as appropriate. While there is looming concern over macroeconomic uncertainty involving recent chip export restrictions to China, we are confident in Cadence’s robust business and raise our fair value estimate to $161 from $157. We view shares as fairly valued.

Cadence provides electronic design automation, or EDA, software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Cadence provides electronic design automation, or EDA, software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Narrow-moat Cadence Design Systems reported a strong second quarter, with results that meaningfully exceeded management’s guidance and our at-consensus expectations. Cadence continues to benefit from secular trends toward hyperscale computing, 5G communications, and artificial intelligence/machine learning, which are all increasing in computing complexity, connectivity, and storage needs. Amid the intensified semiconductor design demand environment, we believe Cadence holds a unique position to capitalize on two key industry dynamics: advancing technologies requiring system-level designs, packaging, and analysis and increasing software content for systems companies. We are impressed by Cadence’s deployment of expertise across software and hardware solutions thus far and view management’s raised outlook for fiscal 2022 as appropriate. With this, we are raising our fair value estimate to $157 per share from $146 and view the shares as slightly overvalued.

Cadence provides electronic design automation, or EDA, software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Narrow-moat Cadence Design Systems reported a strong first quarter, with the top and bottom line exceeding both management’s and our at-consensus expectations. Cadence continues to benefit from secular trends toward hyperscale computing, 5G communications, and AI/ML, which are all accelerating computing complexity, connectivity, and storage needs. While Cadence, like others in the space, benefits from this golden era of semiconductor design demand, we view the firm to be uniquely positioned to favorably capitalize on two key industry dynamics: advancing technologies requiring system-level designs, packaging, and analysis, and systems companies with more software content requiring hardware platforms for software bring-up. As a result, we view the firm as jointly benefiting from an overall industry boom and a preferential positioning with its systems portfolio, and view management’s raised outlook for fiscal 2022 as appropriate. We are raising our fair value estimate to $146 per share, from $138, and view shares as slightly overvalued.

Cadence provides electronic design automation software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence/machine learning, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.

Cadence provides electronic design automation software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. We believe Cadence offers a compelling value proposition for investors looking to capitalize on secular trends in technology that are increasing the complexity of chip designs and advancing the digitalization of various end markets. Our fair value estimate for Cadence is $138 per share, up from $127 as we model stronger near-term growth and profitability. With shares trading at around $155, we view the narrow-moat stable-moat-trend company as slightly overvalued.

Cadence provides electronic design automation software, intellectual property, and system design and analysis products that are critical to the semiconductor chip design process. As secular trends toward artificial intelligence/machine learning, 5G communications, autonomous vehicles, and cloud computing, among others, accelerate, we expect that Cadence will benefit from both the rising complexity of chip designs and the advancing digitalization of various end markets. We believe narrow-moat Cadence has a long growth runway as it uses strategic organic and inorganic investments to expand its platform amid a growing semiconductor landscape.