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Cypress (CY) Scales 52-Week High on IoT & Auto Strength

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Shares of Cypress Semiconductor Corporation have rallied to a new 52-week high of $15.63, eventually closing a shade lower at $15.51 on Oct 6. The outperformance can be attributed to the company’s strength in the auto segment and expanding presence in the IoT market, driven by acquisitions, new product launches and consistent execution, which is giving a boost to the top line and profitability.

We note that Cypress has beaten the Zacks Consensus Estimate for earnings in all the trailing four quarters, with an average positive surprise of 15.93%.

Cypress has a market cap of $5.16 billion. The stock has had an impressive run on the bourse year to date. Cypress has gained 35.6%, significantly outperforming the industry’s gain of 28.2%.

 

Key Growth Factors

Cypress is a semiconductor company that offers high-performance digital and mixed-signal integrated circuits. The company’s advanced technology, momentum in new products, increased customer wins and growth initiatives will continue to drive growth.

The company has been gaining market share in the IoT market. Its acquisition of the Wireless IoT business last year has further strengthened its leading position in this market.  Currently, its WICED platform is one of the largest IoT portfolios in the industry.

Recently, Cypress' IoT connectivity platform teamed up with Arrow Electronics (ARW - Free Report) to deliver pioneering solutions to facilitate new, inventive business models for this market. The adoption of 802.11ac and Bluetooth into emerging IoT platforms bode well for the company’s growth in the latter half of the year. This is a big positive and expected to aid the company’s growth.

Moreover, Cypress’ USB-C product continues to witness rapid penetration. Its customer base grew almost 50% year over year in the second quarter. Automotive revenues grew 7%.

The launch of Audi R8 is also a positive for the company as it will equip the model with 802.11ac connectivity for content sharing, hotspot and rear-seat entertainment.

Also, the company gained momentum from strong fundamentals and better-than-expected second-quarter 2017 results reported in July. Since then, the stock has moved up 6.7%.

For the upcoming third quarter, management expects wireless connectivity sales to increase due to the holiday season. The company targets annual revenue growth from the segment in the range of 35% to 40%, up from the previous target of 23% to 27%.

Cypress’ strong revenue growth, solid financial conditions, increasing market share in the IoT market and strong long-term growth potential position it favorably.

 

Zacks Rank & Key Picks

Currently, Cypress carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector include Applied Materials, Inc. (AMAT - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and ASML Holding N.V. (ASML - Free Report) , holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for Applied Materials and ASML Holding N.V. is projected to be 17.1% and 21.4%, respectively.

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