Report
Andrew Lange
EUR 850.00 For Business Accounts Only

Morningstar | CDNS Updated Star Rating from 07 Jun 2019

Cadence Design Systems is a market-leading provider of electronic design automation, or EDA, software, hardware, and intellectual property that automates the design and verification of integrated circuits or larger chip systems. With the ongoing pressure of building smaller, faster, and more power-efficient chips, demand for Cadence’s sticky software and IP bodes well as the firm helps its clients offload this design expertise and meet these constant technology-driven expectations. We expect a stable competitive environment, as Cadence primarily competes against old foes such as Synopsys and Mentor Graphics (now owned by Siemens). We forecast healthy high-single-digit top-line growth over the long term as the firm targets incremental growth opportunities within traditional EDA customers and nontraditional “systems” customers.There are some positive secular forces that contribute to Cadence’s rosy long-term growth outlook. We think the firm is nicely poised to benefit from technological innovation related to artificial intelligence, the “Internet of Things,” and autonomous vehicles. Developments in these burgeoning technologies are expected to expand Cadence’s total addressable market, or TAM, to about $30 billion over the next five years from $10 billion as nontraditional chipmakers look to use Cadence’s tools in their own designs.We don’t think there is a high amount of differentiation in core EDA tools provided by Cadence, particularly compared with Synopsys. However, Cadence’s recently launched Cadence Cloud is an area of delivery where the firm is looking to set itself apart. We think Cadence Cloud is appealing, given the elastic nature of customer usage and the scalability of cloud computing power that can save clients exorbitant IT capital expenditure and processing time. For nontraditional companies entering chip design, we think the cloud-based approach will save them upfront infrastructure costs, and thus, we see an opportunity for TAM expansion. For larger traditional semiconductor clients, cloud-based simulation and emulation may be appealing in Cadence’s cloud model, where usage can be scaled only when it is needed.
Underlying
Cadence Design Systems Inc.

Cadence Design Systems provides solutions that enable its customers to design electronic products. The company's products offerings include software, hardware, services and reusable integrated circuit (IC) design blocks, which are referred to as intellectual property (IP). The company provides maintenance for its software, hardware, and IP product offerings. The company combines its products and technologies into categories related to design activities: Functional Verification (including hardware for emulation and prototyping); Digital IC Design and Signoff; Custom IC Design and Simulation; System Interconnect and Analysis (printed circuit boards and IC package); and IP (includes design IP and verification IP).

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Andrew Lange

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