Buy the Dip: Analysts Eye Cadence's Pullback as Golden Opportunity After Q1 Beat

Keybanc analyst Jason Celino maintains Cadence Design Systems, Inc CDNS with an Overweight rating, raising the price target from $225 to $235.
Cadence posted better 1Q results on strength in hardware. The more robust than-expected revenue and expense management combined led to a modest operating margin and EPS beats.
However, the magnitude of the 2023 revenue guidance raise was more in line with consensus levels, as it awaits more visibility on the second-half hardware demand, which he believes is conservative.
With the stock up +30% YTD (vs. Nasdaq +15%) pre-print, aftermarket trading suggests the stock may take a breather post-print.
The analyst views Cadence as a core holding and would use any pullback as a buying opportunity.
The price target boost reflects his confidence in Cadence's multiple long-term secular growth drivers.
Needham analyst Dr. Charles Shi reiterates a Buy rating on Cadence with a price target of $235.
Cadence stock decline reflects market reaction to a 2Q23 revenue guidance miss and 1Q23 bookings shortfall. The market may be misreading Cadence's print.
After the call and the callback with management, he concluded that Cadence's 2Q23 revenue miss is due to slowing hardware sales after a strong 1Q23. Also, Cadence's 1Q23 bookings shortfall is primarily a timing issue, as more contracts are typically due in the second half.
The second-half bookings will be stronger than the first half, according to Shi.
The business is strong despite the weak macro environment and prefers to buy on the weakness today.
Price Action: CDNS shares traded lower by 4.80% at $202.75 on the last check Tuesday.

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