Traders Await Apple’s Results Before Deciding the Cirrus Trend (CRUS)

Semiconductor manufacturer Cirrus Logic (NASDAQ: CRUS) filled the positive gap that was created in its stock charts between Friday’s close and yesterday’s opening due to a rating upgrade by Feltl & Co. Traders now await the results of Apple (NASDAQ: AAPL), which contributes the majority of Cirrus revenue, to decide the impending price action.

The Texas-based company develops signal processing integrated circuits (IC’s) for audio and energy markets. Cirrus also provides controllers for LED lighting products, as well as high-precision analog and mixed-signal products for energy measurement and energy exploration applications. The company supplies audio chips to Apple.

Beginning January 2012, the share price of Cirrus travelled an upward slope with no major corrections. Cirrus, which reported strong fiscal 2012 third-quarter results on January 9 and issued fourth-quarter guidance well above the analysts’ estimates, triggered a rally in its share price from $16.97 to $22.07 on January 26. The shares of Cirrus continued to trade in the range of $20.00 to $25.00 until the last week of April 2012. The fiscal 2012 fourth-quarter results just met street estimates. However, a statement referring to the future product launches from Apple and its positive impact on orders for the company’s audio chips enabled the share price to spiral upwards to around $28.00 by the end of April 2012. After a downgrade by Oppenheimer & Co. from “outperform” to “perform”, the share price of Cirrus dwindled down to $25.69 on July 26.

Even though Cirrus missed the top line estimates for the first quarter of fiscal 2013, the shares rose to a 52-week high of $38.53 by August 14 due to positive revenue guidance for the next quarter. An “overweight” rating from Barclays with a price target of $47.00 followed by a “buy” from Zacks Equity Research assisted the share price to rally further to a new 52-week high of $45.49 by September 5.

Yesterday, Feltl & Co. raised the rating of Cirrus to “Strong Buy” from “Buy” with a $54.00 price target. The improved rating was based on the assumption that the company would gain from Apple‘s expected introduction of a smaller iPad. Following the upgrade, the share price of Cirrus, which closed at $38.26 on October 19, reopened at $38.97 per share yesterday. Today, the shares of Cirrus opened at around $39.00 reflecting the overall weakness and gradually declined to fill the gap before venturing into the positive territory by mid-afternoon.

Cirrus is increasingly dependent on Apple for its revenues, as evident from the latest 10-K filing. The share of revenue as a percentage from chip supplies to Apple is 35%, 47% and 62% in FY2010, FY2011 and FY2012, respectively. Apple, which is expected to report its fiscal 2012 fourth-quarter results on October 25, may very well shed some light on the fiscal 2013 second-quarter results of Cirrus scheduled to be reported on October 29.

Cirrus ended the day at $39.21, down $0.45 or 1.1% on a volume of 2.26 million shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.