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Cadence Design Systems Inc CDNS

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Morningstar’s Analysis

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Cadence Delivers Strong Broad-Based Growth for Fiscal 2020; Raising FVE to $106

Nupur Balain Equity Analyst

Analyst Note

| Nupur Balain |

Narrow-moat Cadence Design Systems reported strong fourth-quarter and full-year results that exceeded both management guidance and our expectations. Trends in technology such as 5G, AI, data analytics, and hyperscale computing continue to serve as tailwinds for Cadence and contributed to robust top-line growth in all areas. Cadence continues to perform well by leveraging its Intelligent System Design strategy to generate long-term growth. We are raising our fair value estimate for Cadence to $106 per share from $98 per share due to slightly improved broad-based growth expectations and the time value of money. With shares trading at $142 after hours, we recommend investors wait for a pullback before investing.

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Company Profile

Business Description

Cadence Design Systems was founded in 1988 after the merger of ECAD and SDA Systems. Cadence is known as an electronic design automation, or EDA, firm that specializes in developing software, hardware, and intellectual property that automates the design and verification of integrated circuits or larger chip systems. Historically, the firm’s tools have been relied on by semiconductor firms, but there has been a shift toward other nontraditional “systems” users given the development of the Internet of Things, artificial intelligence, autonomous vehicles, and cloud computing. Cadence is headquartered in Silicon Valley, has approximately 8,100 employees worldwide, and was added to the S&P 500 in late 2017.

2655 Seely Avenue, Building 5
San Jose, CA, 95134
T +1 408 943-1234
Sector Technology
Industry Software - Application
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Aggressive Growth
Employees 8,800