Cadence Design Systems (CDNS): Expectations Overshadowed Execution - RBC

RBC Capital analyst, Mitch Steves, maintained his Outperform rating on shares of Cadence Designs (NASDAQ: CDNS) after high expectations overshadowed solid execution. Cadence reported Jun-qtr results slightly ahead of expectations and guided Sept-qtr slightly below as hardware sales saw record results in Jun-Cadence Design Systems' (NASDAQ: CDNS) qtr (causing modest lumpiness in the top-line).

Importantly, full year guidance was maintained at the mid-point now calling for $1.80-1.83B/$1.17-1.23 (prior $1.79-1.84B/$1.15-1.25) and total bookings remain healthy at $2.02-$2.08B for FY16 (+6-9% growth). Finally, despite higher hardware revenue mix, gross margins came in at ~89%, implying higher margins from the shift to Z1 sales (away from XP) and a defensible business model with potential for 90%+ gross margins.

Net Net: while expectations into the quarter were high, we think the Company is continuing to execute from both a top-line and margin perspective. We reiterate our Outperform rating and would continue to buy shares on any weakness.

No change to the price target of $29.00

For an analyst ratings summary and ratings history on Cadence Designs click here. For more ratings news on Cadence Designs click here.

Shares of Cadence Designs closed at $26.13 yesterday.

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