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Cadence Design Systems Inc CDNS

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Cadence’s Investments Are Paying off as Demand Landscape Intensifies; Raising FVE to $114

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Narrow-moat Cadence Design Systems reported a strong third quarter, with results exceeding both management’s and our expectations. On the back of broad-based outperformance, management again raised the fiscal 2021 outlook, and over the near term expects top line growth to accelerate as digital transformations proliferate throughout Cadence’s end-markets. As a result, we are raising our fair value estimate to $114 per share, from $106, but still recommend waiting 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, semiconductor firms have relied on the firm's tools, 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.

Contact
2655 Seely Avenue, Building 5
San Jose, CA, 95134
T +1 408 943-1234
Sector Technology
Industry Software - Application
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Aggressive Growth
Employees 8,800