Technology design firms Cadence Design (NASDAQ:CDNS) stock has taken a sharp sell-off since hitting all-time highs on Dec. 28, 2021. The IT services provider is diversified throughout the technology sector with services ranging from designing, testing, and verifying semiconductor systems to optical systems and application software development.
The Company services industries ranging from automotive, 5G, hyperscale computing, aerospace, and defense systems. Its solutions enable more efficient chip design and scalability.
As the reopening continues and foundries expand capacity, Cadence will be a benefactor in several industries. This is evidenced by Cadence raising both its fiscal Q1 and full-year top and bottom-line guidance in its Q4 2021 earnings call. The momentum continues to improve into 2022. Prudent investors can use the opportunistic pullbacks to consider scaling into a position in Cadence Designs.
Fiscal Q4 2021 Earnings Release
On Feb. 22, 2022, Cadence released its fiscal fourth-quarter 2021 results for the quarter ended December 2021. The Company reported an earnings-per-share (EPS) profit of $0.82 versus $0.78 consensus analyst estimates, a $0.02 beat. Revenues rose 1.7% year-over-year (YoY) to $773.04 million, beating analyst estimates for $757.36 million. The Verification business grew 20% YoY.
The hardware family added more than 30 new clients and over 100 repeat orders in 2021. Cadence CEO Anirudh Devgan commented,
"We accelerated our Intelligent System Design strategy, introducing over a dozen significant innovative products and making key strategic acquisitions. With generational industry trends continuing to drive robust design activity at both semiconductor and system companies, I excitedly look forward to Cadence driving further customer and shareholder success this year."
Upside Guidance 2022 Guidance
Cadence raised fiscal Q1 2022 guidance of EPS between $1.00 to $1.04 versus $0.82 consensus analyst estimates on revenues between $850 million to $870 million versus $770 million analyst estimates. The Company sees fiscal full-year 2022 EPS between $3.70 to $3.80 versus $3.56 consensus analyst estimates on revenues between $3.32 billion to $3.38 billion versus $3.24 billion analyst estimates.
Conference Call Takeaways
CEO Devgan underscored how robust designs are driving strong tailwinds as it expects broad-based momentum to continue into 2022 and accelerate both top and bottom lines as evidenced by the raised guidance. Its Intelligent Design strategy triples its total addressable market.
Cadence has expanded its core EDA and IP solutions footprint with both existing clients and new customers adopting its solutions. Its Digital and Signoff segment generated 10% top-line growth for the year. Its digital full flow technology helped to close 45 new clients in 2021. Cadence Cerebrus solution utilized machine learning technologies to assist in design space through intelligent optimization of automated digital full flow. Its designs have helped a U.S. automaker client reduce the power consumption of 5-nanometer SoC AI blocks by almost 10% within two weeks.
He added,
"And Cadence Cerebrus enabled a marquee U.S. semiconductor company to tape out their next-generation SoC with a 5x productivity improvement on several critical blocks. Rapidly escalating system verification and software bring-up challenges continue to drive heavy demand for our verification full flow solutions, delivering the industry's leading verification throughput."
Its Cadence Cloud scaled over 250 customers using its solutions.
CDNS Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for CDNS stock. The weekly rifle chart peaked near the $192.62 Fibonacci (fib) level. Shares collapsed towards the $132s before attempting to coil. The weekly rifle chart downtrend stalled with a flat 5-period moving average (MA) at $146.07 as shares slipped under the weekly 50-period MA at $153.24 as weekly 15-period MA continues to fall at $160.96.
The weekly stochastic bounced and stalled at the 20-band that will resolve by either mini pup through the 20-band higher or cross back down under the 20-band. The weekly market structure low (MSL) buy triggers a breakout above $159.51.
The daily rifle chart uptrend is starting to potentially break down with a falling 5-period MA at $149.41 against the flat 15-period MA at $147.44 as the stochastic falls toward the 60-band. The daily 50-period MA resistance is falling at $154.61 and the 200-period MA is flat at $156.61. The daily lower Bollinger® Bands (BBs) sit at $130.63.
Prudent investors can watch for opportunistic pullback levels at the $143.12 fib, $139.38 fib, $134.84 fib, $131.99 fib, $128.12 fib, $124.39 fib, and the $122.75 fib level. Upside trajectories range from the $161.01 fib towards the $177.59 fib level.
