Cadence Design Systems (CDNS) shares rose Tuesday after the maker of electronic systems design software beat Wall Street’s targets for the second quarter and guided higher for the current quarter and full year. CDNS stock is approaching a buy point.
The San Jose, Calif.-based company late Monday said it earned an adjusted $1.08 a share on sales of $858 million in the June quarter. Analysts polled by FactSet had expected Cadence earnings of 96 cents a share on sales of $834 million. On a year-over-year basis, Cadence earnings rose 26% while sales climbed 18%.
For the current quarter, Cadence forecast adjusted earnings of 96 cents a share on sales of $870 million. That’s based on the midpoint of its outlook. Analysts were looking for earnings of 93 cents a share on sales of $846 million in the third quarter. In the same quarter last year, Cadence earned 80 cents a share on sales of $751 million.
Cadence also raised its financial targets for the full year. It now expects to earn an adjusted $4.09 a share on sales of $3.49 billion. Wall Street was modeling 2022 earnings per share of $3.92 a share on sales of $3.41 billion.
CDNS Stock Climbs After Report
On the stock market today, CDNS stock advanced 1.8% to 170.75. During the regular session Monday, CDNS stock dipped a fraction to close at 167.66.
“Our strong performance is emblematic of the megatrends of the long-term strength of semis, systems companies investing more in silicon, and the convergence of system and chip designs,” Chief Executive Anirudh Devgan said in a news release.
Cadence offers a suite of software for designing and verifying integrated circuits and other electronic systems.
Cadence Stock Gets Price-Target Hikes
Needham analyst Charles Shi called the Cadence report a “bright spot in a gloomy semiconductor industry.” He maintained his buy rating on CDNS stock and raised his price target to 200 from 193.
Rosenblatt Securities analyst Blair Abernethy upped his price target on CDNS stock to 185 from 170 and stuck with his buy rating.
In a note to clients, Abernethy predicted Cadence will have “continued solid growth ahead.” The company is seeing strong business from the automotive and cloud computing segments, he said.
KeyBanc Capital Markets analyst Jason Celino reiterated his overweight, or buy, rating on CDNS stock. He kept his price target of 215.
“With secular drivers from increasing silicon content in autos, autonomous driving, 5G, artificial intelligence/machine learning designs, and increasing chip design complexity, we continue to like the favorable trends in EDA (electronic design automation),” he said in a note to clients.
Cadence On Two IBD Stock Lists
CDNS stock is in the IBD Long-Term Leaders Portfolio along with industry peer Synopsys (SNPS). Both design software stocks also are on the IBD 50 list of top-performing growth stocks.
Cadence customers make electronic products ranging from chips and boards to complete systems. Its clients make devices for hyperscale computing, 5G communications, automotive, mobile, aerospace, consumer, industrial and health-care applications.
Also Monday, Cadence announced a deal to buy privately held OpenEye Scientific Software for about $500 million in cash. OpenEye provides computational molecular modeling and simulation software used by pharmaceutical and biotechnology companies for drug discovery.
On July 15, Cadence completed its acquisition of Future Facilities for an undisclosed sum. Future Facilities provides electronics cooling analysis and energy performance optimization solutions for data center design and operations using physics-based 3D digital twins.
CDNS stock ranks second out of 12 stocks in IBD’s Computer Software-Design industry group, according to IBD Stock Checkup. The stock has an IBD Composite Rating of 96 out of 99. Synopsys is first in the group with a Composite Rating of 98.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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