Cadence Design Systems, Inc. (NASDAQ: $CDNS) is a technology and computation software company based in San Jose, CA. The company is a leader in electronic system design, with over 30 years of computational software expertise.
On Monday, April 22, the company released its Q1 fiscal 2024 results after markets closed to a negative market reaction.
Cadence Design Systems Q1 Results
The company reported a revenue of $1.009 billion, compared to $1.022 billion in Q123, but above estimates of $1.002 billion. Its GAAP net income was $247.64 billion, below estimates of $307.25 million.
The company’s GAAP EPS came in at $0.91 compared to $0.89 in Q123 but below estimates of $1.13, while non-GAAP EPS came in at $1.17 compared to $1.29 in Q123 and above estimates of $1.13.
The decline in non-GAAP EPS marks the first recorded decline in nine quarters, while the revenue decline marked its first quarterly drop in over eight years.
GAAP operating margin came in at 25% compared to 32% in Q123, while the non-GAAP operating margin came in at 38% compared to 42% a year ago.
Other Highlights
Cadence Design Systems announced the launch of Palladium Z3 emulation and Protium X3, third-generation hardware accelerated verification platforms that deliver 2x capacity and 1.5x better performance than the previous generation.
The company also announced a collaboration with Arm to create a chiplet-based reference design and software development platform to boost software-defined vehicle innovation.
Q2 and Full Year Fiscal 2024 Guidance
For fiscal 2024, Cadence Design Systems expects revenue of $4.56 billion to $4.62 billion. It expects a GAAP operating margin of 31%-32% and 42%-43% on a non-GAAP basis. The company expects a GAAP EPS of $4.40-$4.14 and a non-GAAP EPS of $5.88-$5.98. Its full-year revenue and non-GAAP EPS estimates are in line with forecasts.
For the second quarter, the company forecasted sales of $1.03 billion to $1.05 billion, below the analysts’ estimates of $1.11 billion at the midpoint. It expects a GAAP operating margin of 26.5%-27.5% and 38.5%-39.5% on a non-GAAP basis.
The company forecast a GAAP ESP of $0.72-$0.77 and a non-GAAP EPS of $1.20-$1.24, below the non-GAAP ESP estimate of $1.43 at the midpoint.
In Q223, the company reported an EPS of $1.22 and revenue of $977 million.
CDNS Stock Performance
At the close of trading on Monday, April 22, Cadence Design Systems shares were up 1.7% to $185.20, signaling upbeat expectations in its Q1 results. However, the stock slid 2.34% to $278.35 at 9:34 AM EDT on Tuesday, April 23, as the market reacted to the disappointing Q2 guidance.
CDNS stock is up 8.41% thus far this year, above the Technology sector’s 3.55% gain and the Software – Application industry’s loss of 2.51%. The stock is up 39.78% in the past 52 weeks compared to the 23.06% gain of the SPX.
The shares are trading below their 52-week high of $327.36 and significantly above the 52-week low of $194.01. They are just below the 50 DMA of $305.43 and above the 200 DMA of $265.78. Its current intraday market cap is $77.76B.
Analysts Outlook on Cadence Design Systems
According to 11 stock analysts, Cadence Design has an overall moderate buy rating. The analysts forecast a high of $350 and a low of $280 for the stock in the next 12 months. Their average price target of $352.45 is a 17.92% upside based on the most recent price.
IS CDNS a Buy?
While Cadence Design Systems Q2 guidance is disappointing, the company’s long-term growth prospects remain lucrative. The company has made a foray into AI and high-performance computing, which are projected to grow tremendously in the coming decade.
Additionally, the stock has outperformed its industry and the general market thus far. As such, CDNS stock presents a great buying opportunity amidst the recent downturn for investors with long investment horizons.
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