The Cloud Electronic Design Automation (EDA) is a software tool that the semiconductor industry uses to design complex electronic systems. The rising need to integrate power electronics into smartphones, wearables, and intelligent home systems to facilitate remote lifestyles is expected to fuel the growth of the cloud EDA market.
The large-scale complex circuits developed and designed on the cloud EDA are used in precision industries such as aerospace, healthcare, and automotive and defense equipment. Furthermore, significant breakthroughs in cloud computing, Internet of Things (IoT) technologies, and artificial intelligence (AI) should further increase the demand for cloud EDA software. According to a Report Ocean report, the cloud EDA market is expected to grow at a 5.5% CAGR through 2026.
Given this backdrop, we think it could be wise to add quality cloud EDA stocks Synopsys Inc. (SNPS), Cadence Design Systems, Inc. (CDNS), Agilent Technologies, Inc. (A), and Keysight Technologies, Inc. (KEYS) to your portfolio. These stocks look well placed to capitalize on the industry’s growth.
Synopsys Inc. (SNPS)
Software products and services provider SNPS in Mountain View, Calif., supplies electronic design automation software engineers use to design and test integrated circuits. The company offers semiconductor intellectual property products. It is also a provider of software tools, and serves the electronics, financial services, automotive, medicine, and energy sector.
On Dec. 22, 2021, SNPS announced that Juniper Networks had adopted its Synopsys OptoCompiler platform, including the OptSim and PrimeSim HSPICE simulation solutions, to accelerate the development of photonic-enabled chips for the next generation of optical communications. Juniper plans to use SNPS’ solutions to design and optimize its hybrid silicon and InP optical platform.
SNPS’ revenues have surged 12.3% year-over-year to $1.15 billion for its fiscal fourth quarter, ended Oct. 31, 2021. The company’s adjusted net income came in at $285.75 million, up 15.3% year-over-year. Also, its adjusted EPS grew 15.1% year-over-year to $1.82.
Analysts expect SNPS’ EPS for the quarter ending Jan. 31, 2022, to increase 55.9% year-over-year to $2.37. Its revenue for fiscal 2022 is expected to increase 13.2% year-over-year to $4.76 billion. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the last nine months, the stock has gained 31.2% in price to close yesterday’s session at $338.59.
SNPS’ strong fundamentals are reflected in its POWR ratings. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B grade for Growth, Stability, and Sentiment. SNPS is ranked first of 49 stocks in the B-rated Technology-Hardware industry. Click here to see the additional POWR ratings for SNPS (Value and Momentum).
Cadence Design Systems, Inc. (CDNS)
CDNS provides solutions that enable its customers to design electronic products. The San Jose, Calif.-based company’s product categories include Functional Verification, Digital Integrated Circuits Design and Signoff, Custom IC Design and Verification, System Interconnect and Analysis, and intellectual property.
On Nov.17, 2021, CDNS announced that Samsung Foundry had qualified its Cadence Integrity 3D-IC platform’s 2D-to-3D native 3D partitioning flow. The new flow will enable customers to partition existing 2D designs into 3D memory-on-logic configurations and achieve better power, performance, and area with a homogeneous 3D stack when compared with the original 2D design.
For its fiscal third quarter, ended Oct. 2, 2021, CDNS’ revenue increased 12.6% year-over-year to $751 million. The company’s non-GAAP net income came in at $221.57 million, up 12.4% year-over-year. Its non-GAAP EPS increased 14.2% year-over-year to $0.80.
For its fiscal 2022, analysts expect CDNS’ EPS to increase 13.4% year-over-year to $3.56. Its revenue for fiscal 2021 is expected to increase 10.8% year-over-year to $2.97 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 27.2% in price over the past year to close yesterday’s trading session at $170.18.
It is no surprise that CDNS has an overall B rating, which translates to a Buy in our POWR rating system. It has an A grade for Quality and a B grade for Sentiment. It is ranked #25 of 167 stocks in the Software – Application industry. To see the additional ratings of CDNS for Growth, Value, Momentum, and Stability, click here.
Agilent Technologies, Inc. (A)
Santa Clara, Calif.-based A provides application-focused solutions that include instruments, software, services, and consumables for the entire laboratory workflow. The company serves the life sciences, diagnostics, and applied chemical markets. Its business segments include life sciences and applied markets, diagnostics and genomics, and Agilent CrossLab business.
On Nov.1, 2021, A unveiled its Agilent 6560C Ion Mobility LC/Q-TOF enhancements to the VWorks automation software suite and new AssayMAP large capacity cartridges. These products will improve the analysis of proteins and peptides to speed up the development of new protein-based therapeutics in biopharma.
A’s revenue increased 12% year-over-year to $1.66 billion for the fourth quarter, ended Oct.31, 2021. The company’s non-GAAP net income increased 20.6% year-over-year to $368 million. Also, its non-GAAP EPS increased 23.4% year-over-year to $1.21.
Analysts expect A’s EPS and revenue for fiscal 2022 to increase 11.3% and 7.1% year-over-year to $4.25 and $5.95 billion, respectively. Over the past year, the stock has gained 17.7% to close yesterday’s trading session at $149.51.
A’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system. It has a B grade for Value, Stability, and Quality. Within the Medical – Diagnostics/Research industry, it is ranked #3 of 58 stocks. Click here to see the Growth, Momentum, and Sentiment ratings.
Keysight Technologies, Inc. (KEYS)
Santa Rosa, Calif.-based KEYS is a technology company that provides electronic measurement instruments, design and test software, and systems-related services. The company’s operating segments include Communications Solutions Group (CSG) and Electronics Industrial Group (EISG).
On Nov.30, 2021, KEYS launched its new Keysight P9002A parallel parametric test system, which provides high throughput and cost-effective wafer tests to accelerate time-to-market in R&D and lower cost-of-test in manufacturing. The new parallel parametric test system addresses the technical challenges faced by the industry in adapting to new materials, miniaturization, and 3D packaging processes. It also helps manufacturers in ramping up capacity.
For its fiscal fourth quarter, ended Oct. 31, 2021, KEYS’ orders increased 21.1% year-over-year to $1.49 billion. The company’s revenue increased 6% year-over-year to $1.29 billion. In addition, its non-GAAP net income increased 10.8% year-over-year to $338 million. KEYS’ non-GAAP EPS came in at $1.82, representing a 12.3% increase year-over-year.
For the quarter ending April 30, 2022, KEYS’ EPS and revenue are expected to increase 13.9% and 6.9%, respectively, year-over-year to $1.64 and $1.29 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 31.2% in price to close yesterday’s trading session at $190.40.
KEYS’ strong fundamentals are reflected in its POWR Ratings. It has an overall B rating. which equates to a Buy in our proprietary rating system. It has an A grade for Quality and a B grade for Stability and Sentiment. It is ranked #7 of 45 stocks in the Technology – Electronics industry. Click here to see the additional ratings of KEYS for Growth, Value, and Momentum.
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SNPS shares were trading at $339.34 per share on Thursday morning, up $0.75 (+0.22%). Year-to-date, SNPS has declined -7.91%, versus a -0.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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