Analyst Note| Nupur Balain |
Narrow-moat Cadence Design Systems reported strong first-quarter results that exceeded both management guidance and our expectations. We are maintaining our $106 fair value estimate for Cadence and recommend investors wait for a margin of safety before investing. Secular trends in the semiconductor industry such as AI, Internet of Things, and hyperscale computing are tailwinds for Cadence and continue to support robust top-line expansion. Cadence's Intelligent System Design strategy is paying off, with the firm's investments in system design and analysis spurring healthy demand in the arena; Cadence recently announced the release of Protium X2 and Palladium Z2 in the prototyping and emulation space, which should support more advanced design processes. We expect industry tailwinds and strong products to lead to healthy long-term growth.