Market Overview

Oppenheimer Upgrades Key Apple Supplier

  • Amid significant volatility over the past six months, Cirrus Logic, Inc. (NASDAQ: CRUS) shares have lost 15 percent since July 28.
  • Oppenheimer’s Rick Schafer upgraded the rating for the company from Perform to Outperform, while establishing a price target of $40.
  • The recent pullback offers an attractive buying opportunity, Schafer stated.

Cirrus Logic reported its F3Q revenue at $348M, in-line with its disappointing pre-announcement. The company witnessed a substantial decline reduction in shipments to Apple Inc. (NASDAQ: AAPL) for the iPhone6s in December.

Cirrus Logic’s GM of 47.5 percent was sequentially up 100bps, with mix shift to higher-margin 55-nm products. Top-customer Apple represented 76 percent of sales, versus 63 percent in F2Q, while Samsung contributed 11 percent, versus 18 percent in F2Q.

Cirrus Logic guided to F4Q revenue of $225M, representing a 35 percent sequential decline, substantially below consensus estimate of $258M, on reduced shipments of its new 55nm Smart Codec into the IP6s. Management expects revenue growth to exceed 15 percent y/y in FY17.

Analyst Rick Schafer wrote, “We believe this growth supports material (+60%- plus) content gains in the upcoming IP7. In a flattish smartphone unit market, our math suggests CRUS has earnings power of $4+ in CY17.”

Cirrus Logic’s shares have declined by 20 percent since early December. The shares have underperformed the SOX, which was down 15 percent. Schafer believes that the risk/reward is currently “compelling,” since estimates have been reset and “content gains in the upcoming IP7 could drive an upward bias to Street estimates through CY2H16.” He added that the recent weakness represents “an opportunity to buy.”

Latest Ratings for CRUS

Aug 2019MaintainsBuy
Nov 2018MaintainsUnderweightUnderweight
Aug 2018MaintainsPositivePositive

View More Analyst Ratings for CRUS
View the Latest Analyst Ratings

Posted-In: Oppenheimer Rick SchaferAnalyst Color Long Ideas Upgrades Analyst Ratings Trading Ideas


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