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Here's Why Cadence (CDNS) Stock is a Smart Investment Bet
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Cadence Design Systems (CDNS - Free Report) is well positioned to benefit from continued demand for the company’s diversified product portfolio and strategic collaborations. Currently, Cadence carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2023 and 2024 earnings per share is pegged at $4.97 and $5.35, indicating an increase of 16.4% and 7.8%, year over year, respectively. The long-term growth rate is 19.1%.
The consensus estimate for 2023 and 2024 revenues is pegged at $4.04 billion and $4.38 billion, implying year-over-year growth of 13.3% and 8.4%, respectively.
CDNS has an impressive earnings surprise record. Earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 10.5%. Shares of CDNS have soared 29.4% in the past year against a 5.3% decline of the Zacks sub-industry.
Image Source: Zacks Investment Research
A Look at Growth Drivers
Based in San Jose, CA, Cadence offers products and tools that help customers to design electronic products. Its core electronic design automation or EDA software and services enable engineers to develop different types of ICs. Its design IPs are directly integrated into the ICs.
Cadence’s performance is gaining from continued strength across all segments owing to healthy demand for the company’s diversified product portfolio. The company is likely to benefit from long-term secular mega-trends that boosts design activity growth across semiconductor and system companies.
The company’s Palladium and Protium platform is gaining traction among clients in the hyperscale, HPC and auto EV segments. The company is expanding its digital software business by developing front-end Genus and Joules tools and signoff products like Tempus and Quantus.
Apart from that, strategic collaborations and acquisitions are expected to help the company to sustain the top-line growth. CDNS is likely to benefit from increasing spending by enterprises on emerging categories like Internet of Things and augmented/virtual reality. Per data from Mordor Intelligence report, worldwide IoT market is likely to witness a CAGR of 10.53% between 2022 and 2027.
Also, ongoing digitalization is fuelling the growth for hyperscale computing and 5G development.
The company also has a steady share repurchase program. CDNS repurchased shares worth approximately $300 million in the fourth quarter of 2022. In 2022, it repurchased shares worth $1.05 billion.
The company expects to repurchase shares for approximately $125 million in the first quarter of 2023.
However, higher costs related to research and development are likely to dent margins. Stiff competition and weakening IT spending environment are added concerns.
Other Stocks to Consider
Some other top-ranked stocks in the broader technology space are Arista Networks (ANET - Free Report) , Perion Network (PERI - Free Report) and Pegasystems (PEGA - Free Report) , each presently sporting a Zacks Rank #1.
The Zacks Consensus Estimate for Arista Networks’ 2023 earnings is pegged at $5.85 per share, rising 10.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 14.2%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 14.2%. Shares of ANET have increased 18.9% in the past year.
The Zacks Consensus Estimate for Perion’s 2023 earnings is pegged at $2.69 per share, rising 16% in the past 60 days. The long-term earnings growth rate is anticipated to be 25%.
Perion’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 31.7%. Shares of PERI have increased 58.9% in the past year.
The Zacks Consensus Estimate for Pegasystems’ 2023 earnings is pegged at $1.35 per share, rising 66.7% in the past 60 days.
Pegasystems’ earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average surprise being 11.2%. Shares of the company have declined 38.5% in the past year.
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Here's Why Cadence (CDNS) Stock is a Smart Investment Bet
Cadence Design Systems (CDNS - Free Report) is well positioned to benefit from continued demand for the company’s diversified product portfolio and strategic collaborations. Currently, Cadence carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2023 and 2024 earnings per share is pegged at $4.97 and $5.35, indicating an increase of 16.4% and 7.8%, year over year, respectively. The long-term growth rate is 19.1%.
The consensus estimate for 2023 and 2024 revenues is pegged at $4.04 billion and $4.38 billion, implying year-over-year growth of 13.3% and 8.4%, respectively.
CDNS has an impressive earnings surprise record. Earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average being 10.5%. Shares of CDNS have soared 29.4% in the past year against a 5.3% decline of the Zacks sub-industry.
Image Source: Zacks Investment Research
A Look at Growth Drivers
Based in San Jose, CA, Cadence offers products and tools that help customers to design electronic products. Its core electronic design automation or EDA software and services enable engineers to develop different types of ICs. Its design IPs are directly integrated into the ICs.
Cadence’s performance is gaining from continued strength across all segments owing to healthy demand for the company’s diversified product portfolio. The company is likely to benefit from long-term secular mega-trends that boosts design activity growth across semiconductor and system companies.
The company’s Palladium and Protium platform is gaining traction among clients in the hyperscale, HPC and auto EV segments. The company is expanding its digital software business by developing front-end Genus and Joules tools and signoff products like Tempus and Quantus.
Apart from that, strategic collaborations and acquisitions are expected to help the company to sustain the top-line growth. CDNS is likely to benefit from increasing spending by enterprises on emerging categories like Internet of Things and augmented/virtual reality. Per data from Mordor Intelligence report, worldwide IoT market is likely to witness a CAGR of 10.53% between 2022 and 2027.
Also, ongoing digitalization is fuelling the growth for hyperscale computing and 5G development.
The company also has a steady share repurchase program. CDNS repurchased shares worth approximately $300 million in the fourth quarter of 2022. In 2022, it repurchased shares worth $1.05 billion.
The company expects to repurchase shares for approximately $125 million in the first quarter of 2023.
However, higher costs related to research and development are likely to dent margins. Stiff competition and weakening IT spending environment are added concerns.
Other Stocks to Consider
Some other top-ranked stocks in the broader technology space are Arista Networks (ANET - Free Report) , Perion Network (PERI - Free Report) and Pegasystems (PEGA - Free Report) , each presently sporting a Zacks Rank #1.
The Zacks Consensus Estimate for Arista Networks’ 2023 earnings is pegged at $5.85 per share, rising 10.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 14.2%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 14.2%. Shares of ANET have increased 18.9% in the past year.
The Zacks Consensus Estimate for Perion’s 2023 earnings is pegged at $2.69 per share, rising 16% in the past 60 days. The long-term earnings growth rate is anticipated to be 25%.
Perion’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 31.7%. Shares of PERI have increased 58.9% in the past year.
The Zacks Consensus Estimate for Pegasystems’ 2023 earnings is pegged at $1.35 per share, rising 66.7% in the past 60 days.
Pegasystems’ earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average surprise being 11.2%. Shares of the company have declined 38.5% in the past year.