Cadence Analysts See It Scoring Driven By Autos, Autonomous Driving, 5G, AI/ML Despite China Restrictions

Needham analyst Charles Shi maintained a Buy on Cadence Design Systems, Inc CDNS with a $200 price target.
Cadence reported a stronger-than-expected 3Q22, partly due to strength in emulation and prototyping hardware sales, and guided 4Q22 above his estimate despite a sequential slowdown into the year-end.
Consistent with his view, the company sees a limited impact from China export restrictions in FY22 and beyond.
Cadence also received its largest-ever IP contract from a U.S. marquee semiconductor company, which may set the stage for sustainable IP growth into FY23 despite a potential China IP slowdown.
Meanwhile, management is cautious about the near-term outlook for upfront sales (primarily hardware) in the next 3-6 months due to strength in FY22 YTD.
Tying it all together, he cut his 1H23 estimates to account for moderate hardware sales, but believed CDNS may grow by over 10% Y/Y in 2023.
KeyBanc's Jason Celino reiterated an Overweight and $215 price target.
Cadence reported a $32 million revenue beat on broad-based strength. The company also raised its 2022 revenue guidance by $46 million (net increase of $14 million) versus the prior consensus.
More importantly, Cadence noted the impact of recent chip restrictions will be "limited and manageable."
With secular drivers from increasing silicon content in autos, autonomous driving, 5G, AI/ML designs, and growing chip design complexity, he continued to like the favorable trends in EDA and view the recent pull-back as a buying opportunity.
Price Action: CDNS shares traded lower by 3.79% at $154.14 on the last check Tuesday.

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