Shares of Cypress Semiconductor Corporation CY have dropped from recent highs, and that sparks an investor opportunity, according to Bank of America.
The company is a “solidly positioned, diversified [semiconductor] company with multiple product cycles, solid earnings leverage, a 3.3 percent dividend and potential M&A benefits,” research analyst Vivek Arya said in a note.
Bank of America reiterated a Buy on Cypress with a $18 price objective. Cypress announced a $0.11-per-share quarterly cash dividend Tuesday.
5 Reasons For Upside
- Cypress’ business is diverse, Arya said: 32 percent automotive, 29 percent consumer and 23 percent industrial. While the street expects 6 percent year-over-year growth, Cypress is aiming for 7-9 percent annual sales growth in the long term, the analyst said.
- Bank of America is projecting Cypress’ EPS at the end of 2018 to land at $1.44, up from a projected $0.70 EPS at the close of 2017.
- The San Jose, California-based semiconductor company’s first-quarter results saw sales growth beating consensus by 400 basis points, after 100bp beats in the previous two quarters, Arya said.
- “We believe [Cypress] can benefit from the improved pricing environment and scarcity value as a small-cap specialist in a fragmented microcontroller market,” Arya said in Tuesday’s note. Cypress is No. 7 in the microcontroller market with a 5.2-percent share, according to Bank of America.
- Cypress has a 35-percent share in the USB Type-C sector, which could grow into a $900 million market by 2021, according to Bank of America projections, with 50 percent of smartphones adopting the technology.
“There are expectations for Cypress to have won some Type-C design in Apple Inc. AAPL’s upcoming iPhone 8, which creates growth but also volatility for Cypress beginning in [the second half of 2017], typical to all Apple suppliers,” Arya said.
Related links:
Semiconductors In 2017: BlueFin Previews The Year Ahead
Semiconductor Stocks Are Red Hot And Showing No Signs Of Cooling Down
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