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Cadence (CDNS) Stock Soars 46% YTD: Will the Uptrend Last?
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Cadence Design Systems (CDNS - Free Report) is witnessing strong momentum this year, with shares having rallied 45.9% year to date compared with the sub-industry’s growth of 37.7% and the S&P Composite’s increase of 15.7%. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment.
Apart from a favorable rank, CDNS has a Growth Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a VGM Score of A or B offer solid investment opportunities.
Growth Factors
Cadence’s stock price is being driven by the healthy demand for the company’s diversified product portfolio across all segments.
Image Source: Zacks Investment Research
The company is experiencing strong demand for its software — particularly verification and digital design products — from customers providing data center servers, networking products and smartphones that continue to invest in new design concepts and projects. The launch of Virtuoso Studio and Allegro X AI is likely to help CDNS tap the growing demand for generative artificial intelligence solutions in the digital, verification and system areas.
Secular trends like 5G, the increasing usage of hyperscale computing and digital transformation in numerous industries are driving design activity across semiconductor and system companies.
Frequent new product launches bode well. Among existing products, the Palladium and Protium (especially Z2 and X2) platforms are witnessing continued momentum. Cadence won 14 new clients and 30 repeat orders in the last reported quarter. Most deal wins came from clients in the aerospace & defense and automotive segments.
Moreover, a strong cash position bodes well as it can help the company pursue strategic acquisitions and other investments in growth initiatives. Cadence had cash and cash equivalents of approximately $917 million. The long-term debt was $648.3 million as of Mar 31, 2023.
Its shareholder-friendly initiatives are also noteworthy. CDNS repurchased shares worth approximately $125 million in the first quarter. In 2022, it repurchased shares worth $1.05 billion. Management expects to repurchase shares for approximately $125 million in the second quarter of 2023.
Cadence’s earnings per share are expected to increase 17.1% and 11.9% on a year-over-year basis to $5.00 and $5.60 in 2023 and 2024, respectively.
The Zacks Consensus Estimate for 2023 and 2024 revenues has remained unchanged in the past 60 days. The company’s revenues for 2023 are projected to rise 13.7% to $4.05 billion. For 2024, revenues are anticipated to improve 9.6% to $4.44 billion.
The Zacks Consensus Estimate for Woodward’s fiscal 2023 earnings has increased 1.7% in the past 60 days to $3.58 per share. WWD’s long-term earnings growth rate is anticipated to be 13.5%. Shares of the company have risen 29.3% in the past year.
The consensus mark for Watts Water Technologies’ 2023 earnings is pegged at $7.27 per share, up 1.1% in the past 60 days. The long-term earnings growth rate is anticipated to be 8%.
Watts Water Technologies’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 16.3%. Shares of WTS have increased 45.7% in the past year.
The consensus mark for Blackbaud’s 2023 earnings is pegged at $3.75 per share, up 1.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 19.4%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average beat being 10.4%. Shares of BLKB have improved 32.4% in the past year.
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Cadence (CDNS) Stock Soars 46% YTD: Will the Uptrend Last?
Cadence Design Systems (CDNS - Free Report) is witnessing strong momentum this year, with shares having rallied 45.9% year to date compared with the sub-industry’s growth of 37.7% and the S&P Composite’s increase of 15.7%. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment.
Apart from a favorable rank, CDNS has a Growth Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a VGM Score of A or B offer solid investment opportunities.
Growth Factors
Cadence’s stock price is being driven by the healthy demand for the company’s diversified product portfolio across all segments.
Image Source: Zacks Investment Research
The company is experiencing strong demand for its software — particularly verification and digital design products — from customers providing data center servers, networking products and smartphones that continue to invest in new design concepts and projects. The launch of Virtuoso Studio and Allegro X AI is likely to help CDNS tap the growing demand for generative artificial intelligence solutions in the digital, verification and system areas.
Secular trends like 5G, the increasing usage of hyperscale computing and digital transformation in numerous industries are driving design activity across semiconductor and system companies.
Frequent new product launches bode well. Among existing products, the Palladium and Protium (especially Z2 and X2) platforms are witnessing continued momentum. Cadence won 14 new clients and 30 repeat orders in the last reported quarter. Most deal wins came from clients in the aerospace & defense and automotive segments.
Moreover, a strong cash position bodes well as it can help the company pursue strategic acquisitions and other investments in growth initiatives. Cadence had cash and cash equivalents of approximately $917 million. The long-term debt was $648.3 million as of Mar 31, 2023.
Its shareholder-friendly initiatives are also noteworthy. CDNS repurchased shares worth approximately $125 million in the first quarter. In 2022, it repurchased shares worth $1.05 billion. Management expects to repurchase shares for approximately $125 million in the second quarter of 2023.
Cadence’s earnings per share are expected to increase 17.1% and 11.9% on a year-over-year basis to $5.00 and $5.60 in 2023 and 2024, respectively.
The Zacks Consensus Estimate for 2023 and 2024 revenues has remained unchanged in the past 60 days. The company’s revenues for 2023 are projected to rise 13.7% to $4.05 billion. For 2024, revenues are anticipated to improve 9.6% to $4.44 billion.
Other Stocks to Consider
Some other top-ranked stocks in the broader technology space are Woodward (WWD - Free Report) , Watts Water Technologies (WTS - Free Report) and Blackbaud (BLKB - Free Report) , Woodward sports a Zacks Rank #1 (Strong Buy) while Watts Water and Blackbaud carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Woodward’s fiscal 2023 earnings has increased 1.7% in the past 60 days to $3.58 per share. WWD’s long-term earnings growth rate is anticipated to be 13.5%. Shares of the company have risen 29.3% in the past year.
The consensus mark for Watts Water Technologies’ 2023 earnings is pegged at $7.27 per share, up 1.1% in the past 60 days. The long-term earnings growth rate is anticipated to be 8%.
Watts Water Technologies’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 16.3%. Shares of WTS have increased 45.7% in the past year.
The consensus mark for Blackbaud’s 2023 earnings is pegged at $3.75 per share, up 1.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 19.4%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average beat being 10.4%. Shares of BLKB have improved 32.4% in the past year.