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Cadence Design Systems Inc CDNS

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Morningstar’s Analysis

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Cadence’s Investments in Intelligent System Design Continue To Pay Off; Maintaining $106 FVE

Nupur Balain Equity Analyst

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.

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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 Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type Aggressive Growth
Employees 8,800