Cirrus Logic Shares up on Buyback News
Cirrus Logic (Nasdaq: CRUS) shares were sharply higher at the open on Wednesday following an announcement that the company's board of directors has authorized a $200 million share buyback program.
Cirrus, which makes analog and digital signal processing audio chips used in Apple (Nasdaq: AAPL) iPhones and other products, has been seeing sharp sales and earnings growth due to the popularity of Apple's products. Apple is the company's biggest customer. During 2012, the share price nearly tripled from 16 at the start of the year to a high of 45.49 in early September.
At that point, investors felt that the shares had gotten ahead of themselves and began a long sell-off which ended only with today's news.
The $200 million buyback would be equal to about 10 percent of shares outstanding at Wednesday's mid-day price of around $31.
In a statement, Cirrus said that “…the repurchases of stock will be funded from working capital and anticipated cash from operations,” according to statesman.com. “The purchases will take place ‘from time to time' and will depend on the market price, general market and economic conditions as well as ‘other corporate considerations.'”
Management clearly wanted to put an end to the recent slide in the share price and feels that, in light of sharply higher earnings, $30 is a good place to draw a line in the sand.
Looking at the chart, it is interesting to note that the price had fallen through a major support level at the 200-day simple moving average (30.54) at the end of last week. If the company had not taken any action, the next support level would have been around 25 and then at the 500-day simple moving average (22.57).
There is a huge gap up in the chart back on July 31 between 29.90 and 35.55. That gap has now been filled.
Technically, management could not have picked a better time to announce the buyback program. Today's rally has put the share price solidly above rising support at the 200-day simple moving average. A reasonable target for a short-term trade would be the 50-day simple moving average which is at 37.33.
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