Two plays today and both in the tech sector. Cadence and Barracuda Networks both have positive charts and solid reasons they should move higher.
NEW BULLISH Plays
CDNS - Cadence Design System - Company Profile
Cadence Design Systems, Inc. develops, sells, leases, and licenses electronic design automation (EDA) software, emulation and prototyping hardware, verification intellectual property (VIP), and design intellectual property (IP) for semiconductor and electronics systems industries worldwide. It offers functional verification products, including logic verification software that enables customers to coordinate verification activities across multiple teams and various specialists for verification planning and closure; and system design and verification products for hardware-software verification, as well as for system power exploration, analysis, and optimization. The company also provides digital integrated circuit (IC) design products, such as logic design products for chip planning, design, verification, and test technologies and services; physical implementation tools, including place and route, signal integrity, optimization, and double patterning preparation; and signoff products to signoff the design as ready for manufacture by a silicon foundry, as well as design for manufacturing products for use in the product development process.
Basically, Cadence is a software company that specializes in software to design chips and validate designs. They reported earnings of 29 cents compared to estimates for 28 cents. Revenue of $453 million beat estimates for $449.7 million. They guided for Q3 for revenue of $440-$450 million and earnings of 27-29 cents. Unfortunately, that was slightly lower than the $457 million and 31 cents analysts expected. They guided for the full year for revenue of $1.8 - $1.83 billion and earnings of $1.17 to $1.23. Analysts were expecting $1.824 billion and $1.21 per share.
The stock was knocked back from $26 to $24 after a strong run since January. Shares have stabilized at $24 and I expect their prior trend to continue. The guidance was conservative and analysts always over estimate.
Earnings Oct 25th.
With a CDNS trade at $24.35
Buy CDNS shares, initial stop loss $23.65.
Optional: Buy Sept $25 call, currently 40 cents, no stop loss.
CUDA - Barracuda Networks - Company Profile
Barracuda Networks, Inc. designs and delivers security and data protection solutions. The company offers cloud-enabled solutions that enable customers address security threats, improve network performance, and protect and store their data. It provides various security solutions and Barracuda Web Security Gateway, a solution to protect users from Web-based threats. The company's security solutions also comprise Barracuda NextGen Firewalls to secure the network and optimize traffic flows; Barracuda Web Application Firewall to protect Web applications and websites from data breaches and downtime; and Barracuda Load Balancer ADC to optimize application performance, availability, and security. In addition, it offers data protection solutions, such as Barracuda Backup, Barracuda Message Archiver, and CudaSign, an eSignature platform. The company sells its appliances, services, and software products to education, government, financial services, healthcare, professional services, telecommunications, retail, and manufacturing industries through its sales personnel, distribution partners, and value added resellers in approximately 100 countries.
On July 7th the company reported adjusted earnings of 20 cents that easily beat analysts for 11 cents. Revenue of $86.7 million rose 11% and also beat estimates for $83.8 million. Recurring subscription revenue rose 20% to $65.3 million because of the success in moving to a cloud subscription model rather than appliance sales. Subscription revenue now represents 75% of all revenue. Active subscriptions rose 14% to over 286,000 customers and the renewal rate was 93%.
Earnings Sept 27th.
After the earnings shares spiked to $18.50 from $15. A day later they spiked again to $19.50 as analysts raised their guidance. Shares consolidated for about three days before beginning to trend higher.
We were stopped out of long position on 8/3 because I had the stop loss too tight. I believe CUDA will move higher after a period of consolidation at the current level. I am putting an entry point just over the current consolidation range.
With a CUDA trade at $22.50
Buy CUDA shares, initial stop loss $21.00.
NEW BEARISH Plays
No New Bearish Plays