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Stockchase Insights Cirrus Logic CRUS-Q BUY ON WEAKNESS Nov 20, 2024

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

CRUS is a fabless semiconductor company. The stock is up 20% this year; market cap is $5.3B, no dividend. It has $550M net cash and decent earnings growth. Free cash flow is high. The last quarter was good, but estimates have been ticking downwards in the past month. There has been some recent insider buying. At 15X earnings it is priced well. We would consider it 'good' but not 'exciting'. Still, for the sector slow and steady can be attractive.
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DON'T BUY

Fully valued now. Needs to become profitable. Has a lot of cash.

DON'T BUY

Has a model price of $2.30.

TOP PICK

He has been invested in the bigger names like Apples, Ebay and Google, but as be looks at the run up they have had and the combined cash they have on the books, they are particularly positioned to make acquisitions. This is a large supplier to apple (third of their sales). He thinks this one has a greater capacity to grow than a larger one.

PAST TOP PICK

(A Top Pick March 14/11. Down 27.02%.) Components for hand held devices. Earnings have been very strong but they guided lower so it just recently got hit. Likes because if you are going to participate in the technology sector, it makes sense to own one that’s grows with the potential of being taken over.

TOP PICK

First infiltrated the Apple system about 3 years ago when they introduced one chip. Rumour has it that they will be producing the audio chip for the iPhone 5. The big risk is that 63% of their revenues last year were from Apple. Any time you hitch yourself to one horse, it’s dangerous but this is a pretty good horse to be hitched to. Looking at 25% earnings growth over the next couple of years.

BUY

He is very positive on this company. Apple (AAPL-Q) is their dominant customer. They have borrowed $100 million to “increase capacity for a major customer” which he expects is for iPhone5.

TOP PICK

The whole Apple (AAPL-Q) supply chain has sold off in sympathy with Apple, a lot of cases justifiably and a lot of cases unjustifiably. This is in the latter category. 75% of their business comes from Apple. They make the audio chips that go into the iPad and iPhone. Trading at only 6X earnings.

PAST TOP PICK

(A Top Pick June 20/12. Down 40.35%.) This is down as a result of Apple (AAPL-Q) which accounted for over 80% of their business. A year ago, analysts were estimating earnings of $2.17 a share for the year ending May/13. Right now, that estimate is $2.16. So this hasn’t changed, it’s the outlook and psychology that has changed. Rates this as a Strong Buy. As Apple recovers, this will recover.

PAST TOP PICK

(Top Pick Mar 27/13, Down 13.30%) Did lose some of the business in the iPad Air.

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