UPDATE: D.A. Davidson Upgrades Cadence Design Systems on Multiple Positive Factors
In a report published Thursday, D.A. Davidson analyst Thomas Diffely upgraded the rating on Cadence Design Systems (NASDAQ: CDNS) from Neutral to Buy, and reiterated the $16.00 price target.
In the report, D.A. Davidson noted, “Upgrading shares to BUY based on 1) healthy design activity in the core EDA markets; 2) an attractive valuation (recent underperformance has moved CDNS' valuation below the broader market multiple and in line with the peer group); and 3) 19% upside potential to our $16 price target (15x 2014 EPS plus net cash). Thus, we are upgrading shares to BUY (from Neutral). Valuation now at a discount to the market and in line with the peer group. Our prior investment thesis on CDNS included a Neutral rating based primarily on solid fundamentals offset by a significant valuation premium. However, over the past month, the stock has been under pressure even though the company's core business remains robust. As a result, shares now trade at only ~13x our out year EPS estimate, below the broader market (~15x) and in line with the peer group. On an EV/EBITDA basis, CDNS trades at 7.6x our 2014 estimate, a discount to the peer group average of 8.5x.”
Cadence Design Systems closed on Wednesday at $13.50.
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