Cadence Design Systems and Synopsys, leaders in electronic design automation, are relative safe havens in the dynamic semiconductor industry, a Wall Street analyst said Monday. Cadence stock and Synopsys stock are both trading in record high territory.
In a note to clients Monday, BofA Securities analyst Vivek Arya predicted that shares of both companies will run higher thanks to their "strong growth" and "low cyclicality."
Arya reiterated his buy ratings on Cadence stock and Synopsys stock. He set a price target of 305 on CDNS stock and 600 on SNPS stock.
On the stock market today, Cadence stock rose 0.5% to close at 251.42. Synopsys stock advanced 0.5% to 491.96.
Cadence and Synopsys "present compelling EPS (earnings per share) compounding investments levered to secularly rising chip design complexity," Arya said.
He added, "We see potential for consistent 12%-15% sales and 15%-20% of EPS growth, in contrast to semiconductor industry cyclicality."
Cadence Stock, Synopsys Stock On IBD Lists
Arya forecast sales in electronic design automation and related semiconductor intellectual property to potentially double toward $30 billion over the next five to six years, growing at a compound annual rate of 12%-15%. Complexity for new artificial intelligence chips will drive the growth, he said.
The EDA and design intellectual property market will generate about $14.1 billion in sales this year, he said.
Risks for the market include the potential for more U.S. government restrictions on tech sales to China. Cadence stock and Synopsys stock also have gotten pushback from investors over their premium valuations, Arya said.
Cadence stock and Synopsys stock are on the IBD 50, Tech Leaders and Long-Term Leaders stock lists. Also, Synopsys stock is on the IBD Big Cap 20 list.
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