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Cirrus Logic Rides on Products Expansion, Risks Persist
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At times, it is prudent to retain certain stocks that have enough potential but are weighed down by tough market conditions. Cirrus Logic Inc. (CRUS - Free Report) seems to be one such stock, which investors should retain if they are looking to reap long-term benefits. Though the stock is facing a few headwinds at the moment, these are transitory in nature. There is enough scope for this Zacks Rank #3 (Hold) company to rebound in the long run.
Factors In Favor of Cirrus Logic
Cirrus Logic is a premier supplier of high-performance analog circuits and advanced mixed-signal chip solutions. The company has broadened product portfolio. Its chips are used in DVD players/recorders, disc drives, sound chips for computers, XBox, professional audio, mobile technologies and voice transmission. Notably, the company is a major chipset provider to Apple Inc. (AAPL - Free Report) and Samsung as it generates a significant portion of revenues from them. Consequently, we believe that new products are likely to drive sales in the near term.
Notably, Cirrus Logic reported better-than-expected second-quarter results and provided encouraging third-quarter revenue guidance. This can be attributed to higher adoption of its products and strength in customer relationships.
Continued investments in the audio segment have also helped the company to come up with innovative products from time to time. This aids it in attracting new customers and brings in additional revenues. Additionally, expansion in the LED market continues to drive growth.
The company also has an expected EPS growth rate of 9.1%. Notably, the stock has delivered positive earnings surprises in the trailing four quarters with an average beat of 18.3%.
Moreover, from a valuation perspective, the stock looks very attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate, which signifies a huge upward potential. Cirrus Logic currently trades at a forward P/E of 12.63x as compared with the industry group average of 40.20x.
Factors Against Cirrus Logic
Notably, shares of the company have gained 2.6% in the last one year, significantly underperforming the industry’s growth of 48.3%.
As Cirrus Logic generates a significant portion of revenues from Apple, there is always an inherent risk of losing an Apple design contract, which will significantly hurt financials. Moreover, sluggish economic growth, as well as IT spending may affect performance, going forward.
Furthermore, the company faces competition from the likes of Texas Instruments Inc. (TXN - Free Report) and STMicroelectronics N.V. (STM - Free Report) , which remains a concern.
Currently, Cirrus Logiccarries a Zacks Rank #3 (Hold).
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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Cirrus Logic Rides on Products Expansion, Risks Persist
At times, it is prudent to retain certain stocks that have enough potential but are weighed down by tough market conditions. Cirrus Logic Inc. (CRUS - Free Report) seems to be one such stock, which investors should retain if they are looking to reap long-term benefits. Though the stock is facing a few headwinds at the moment, these are transitory in nature. There is enough scope for this Zacks Rank #3 (Hold) company to rebound in the long run.
Factors In Favor of Cirrus Logic
Cirrus Logic is a premier supplier of high-performance analog circuits and advanced mixed-signal chip solutions. The company has broadened product portfolio. Its chips are used in DVD players/recorders, disc drives, sound chips for computers, XBox, professional audio, mobile technologies and voice transmission. Notably, the company is a major chipset provider to Apple Inc. (AAPL - Free Report) and Samsung as it generates a significant portion of revenues from them. Consequently, we believe that new products are likely to drive sales in the near term.
Notably, Cirrus Logic reported better-than-expected second-quarter results and provided encouraging third-quarter revenue guidance. This can be attributed to higher adoption of its products and strength in customer relationships.
Continued investments in the audio segment have also helped the company to come up with innovative products from time to time. This aids it in attracting new customers and brings in additional revenues. Additionally, expansion in the LED market continues to drive growth.
The company also has an expected EPS growth rate of 9.1%. Notably, the stock has delivered positive earnings surprises in the trailing four quarters with an average beat of 18.3%.
Moreover, from a valuation perspective, the stock looks very attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate, which signifies a huge upward potential. Cirrus Logic currently trades at a forward P/E of 12.63x as compared with the industry group average of 40.20x.
Factors Against Cirrus Logic
Notably, shares of the company have gained 2.6% in the last one year, significantly underperforming the industry’s growth of 48.3%.
As Cirrus Logic generates a significant portion of revenues from Apple, there is always an inherent risk of losing an Apple design contract, which will significantly hurt financials. Moreover, sluggish economic growth, as well as IT spending may affect performance, going forward.
Furthermore, the company faces competition from the likes of Texas Instruments Inc. (TXN - Free Report) and STMicroelectronics N.V. (STM - Free Report) , which remains a concern.
Currently, Cirrus Logiccarries a Zacks Rank #3 (Hold).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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