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hear about “derivative” trades or alternative ways that traders are taking
advantage of a hot sector or new technology without investing directly in the
business itself, which might be overbought or played out.
will sometimes look to related companies that have yet to be recognized by the
masses or have not yet fully profited from a breakthrough technology.
internet was gaining popularity in the 1990s, hundreds of companies were riding
the wave of this new shift in the way we interacted. The internet was not just a new cool
technology, it changed the way we lived and it had (has) the ability to act as
an extremely powerful catalyst for all sorts of growth.
some internet derivative trades that worked exceptionally well; Google GOOG, IBM Corp. IBM,
Rackspace Holding RAX and more.
bear of the day isn’t am unrecognized company that is on the cutting edge of
technology or on the precipice of meteoric growth; it’s a seasoned ‘old tech’
company that is hanging on to another mature tech giant to generate the
majority of its income.
The ties that bind
Cirrus (CRUS - Snapshot Report) generates
a great deal of their total revenue from one client, Apple (almost 90%
according to several sources). The
company supplies Apple with audio chips for their mobile devices.
seems like a good deal to be in bed with one of the best and brightest
companies out there, the relationship has its strains and Apple can not only
have what it wants from Cirrus, but at just about any reasonable price.
brand strength waning and companies like Samsung and Blackberry BBRY nipping at their
heels, Apple not only needs to fight for market share, but keep costs down as
the average selling price for Smartphones has been on the decline.
margins have been suffering as of late and their shares have tumbled from over
$45 just 10 months ago to their current value just above $18. The company recently warned that lower product
sales forecasts from an “unnamed” customer are going to hurt their future
Not a good
making some strides in broadening their customer base and product mix, but they
have to watch their cash and their limited resources in addition to keeping their
biggest client happy.
As a Zacks
Rank #5 (strong sell), they haven’t been pleasing analysts or
shareholders. While the P/E multiple
seems attractive at 10.15 times forward earnings, one has to wonder just how
bad earnings can get.
been slashing their forecasts and the stock currently has a negative 23% ESP
for the coming quarter’s earnings. This
negative ESP, combined with the Zacks Rank of 5 makes for a high probability of
I think there
is a future for Cirrus, but unless Apple’s new iPhone wows crowds and blows the
ever increasing competition away, Apple and Cirrus along with it may have a
long road to recovery.
If you are
looking for a chip maker or want to play on the smartphone revolutoion,
checkout Omnivision Technologies Inc. (OVTI - Analyst Report) – Zack Rank #1 or even Qualcomm (QCOM - Analyst Report)
with a Zacks Rank of 3.
Jared A Levy is one of the most highly sought after traders
in the world and a former member of three major stock exchanges. That is why
you will frequently see him appear on Fox Business, CNBC and Bloomberg
providing his timely insights to other investors. He has written and published
two tomes, “Your Options Handbook”
and “The Bloomberg Visual Guide
to Options”. You can discover more of his
insights and recommendations through his two portfolio recommendation services:
Zacks Whisper Trader- Learn to
buy stocks likely to have robust earnings BEFORE they report.
TAZR Trader – Technical Analysis + Zacks Rank. Best of both worlds approach
to find timely trades.
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