Cadence Design Systems, Inc.CDNS has been witnessing upward earnings estimate revisions of late, reflecting optimism in the stock's prospects.
In fact, the Zacks Consensus Estimate for the company's current-year earnings has increased 7.7% in the past three months to $1.82 per share.
The stock of this San Jose-based electronic product designing solutions provider has climbed 3.4% in the past one year.
Cadence Design Systems, Inc. Price and Consensus
Considering its solid fundamentals and expected long-term earnings per share growth rate of 12%, we believe it will be prudent to retain this Zacks Rank #3 (Hold) stock.
Let us delve deeper and analyze the factors that make this stock worth holding on to.
Abundant Growth Prospects
Robust adoption of company's digital and signoff, custom and analog, and IP solutions along with an expanding customer base remains a positive.
Further, increasing investments on emerging trends like Internet-of-things (IoT), augmented and virtual reality (AR/VR) and autonomous vehicle sub-systems present significant growth opportunity for the company.
Cloud-Ready Solutions: A Key Catalyst
With Cadence Cloud, the company aims to offer a comprehensive cloud portfolio enabling the development of semiconductors and other electronic systems.
The company has collaborated with Microsoft's MSFT Azure, Amazon's AMZN Amazon Web Services ("AWS") and Google Cloud platform to enable smooth design development of electronic systems and semiconductors.
Furthermore, the company's Cloud-Hosted Design Solution achieved Industrial Software Competency status from AWS.
Management is optimistic about the order strength in Palladium Cloud solution which offers cloud-based emulation capacity as per the customers' demand.
We believe the innovative cloud-ready solutions broaden the company's portfolio in an effective manner.
Frequent Product Launches
The company is focusing on providing end-to-end solutions, which rapidly reduces the time required to introduce a semiconductor product in the market. In this regard, the company's frequent product launches and enhancements bode well.
Cadence recently unveiled Tensilica HiFi 5 DSP solution featuring accelerated neural network (NN) and audio processing. Advanced speech recognition processing enables voice-controlled UIs suitable in automotive infotainment devices and smart home assistants.
The company's Cadence Tensilica DNA 100 Processor IP offers both high performance and power efficiency across a full range of compute from 0.5 TeraMAC ("TMAC") to 100s of TMACs.
The significant number of customer wins and other repeat orders are expected to bolster the top line. Notable demand from aerospace and defense sectors remains a tailwind.
Recently, MaxLinear leveraged Cadence Quantus Extraction timing signoff solution to offer MxL935xx Telluride offering, a 400 Gbps PAM4 SoC (system on chip) by utilizing 16FF process technology.
Notably, the company's Legato Reliability Solution is being leveraged by Infineon to accelerate simulation significantly.
The company's Palladium Z1 Enterprise Emulation Platform is enabling Taiwan-based Global Unichip Corporation ("GUC") to accelerate its SoC design processes.
Growing adoption of Cadence Verification Suite which reported revenue growth of 9% on a year-over-year basis in the third quarter of 2018 is another catalyst.
Traction witnessed by Palladium Z1 on the back of strong demand for growing hardware capacity is notable. In fact, two customers expanded Palladium Z1 installation in the third quarter. Five new logos were also added in the third quarter.
Cadence recently unveiled GDDR6 memory IP offering comprising controller, PHY and Verification IP ("VIP") solutions enabled for Samsung's 7LPP process for emerging applications.
Further, Cadence's DDR5 test chip achieved 4400 mega transfers per second data rate in Taiwan Semiconductor Manufacturing Company's TSM 7nm process.
The company's strong collaborations with Samsung and TSMC augur well in the longer haul, enabling it to attain important verification milestones.
However, stiff competition in the simulations market from ANSYS (especially after it acquired 3DSIM and OPTIS) is a concern.
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