October 25, 2022 12:45 p.m | 1 minute read
- Needham Analyst Charles Shi stuck to a buy Cadence Design Systems, Inc CDNS with a Price target $200.
- Cadence reported a stronger than expected 3Q22, in part due to strong sales of emulation and prototyping hardware, and led 4Q22 above its estimate despite a sequential slowdown to the end of the year.
- Consistent with its view, the company sees limited impact of Chinese export restrictions in FY22 and beyond.
- Cadence also secured its largest IP deal to date from a well-known US semiconductor company, which could set the stage for sustained FY23 IP growth despite a potential slowdown in China’s IP business.
- Meanwhile, given the strength in the FY22 YTD, management is cautious on the near-term outlook for pre-sales (mainly hardware) over the next 3-6 months.
- In summary, he lowered his estimates for 1H23 to account for modest hardware sales but believed CDNS could grow over 10% Y/Y in 2023.
- KeyBancs Jason Celino reiterated an overweight position and a price target of $215.
- Cadence reported a $32 million drop in sales on broad-based strength. The company also raised its 2022 revenue guidance by $46 million (net up $14 million) from the previous consensus.
- More importantly, Cadence noted that the impact of recent chip restrictions will be “limited and manageable.”
- Given the secular drivers of increasing silicon content in cars, autonomous driving, 5G, AI/ML designs and growing chip design complexity, he continued to like the favorable trends in EDA and viewed the recent pullback as a buying opportunity.
- Price promotion: CDNS shares traded 3.79% lower at $154.14 on the latest check Tuesday.
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