Cirrus Logic Soars 54.6% YTD: Will the Upside Last?

Cirrus Logic, Inc.'s CRUS stock is continuing its upward trajectory, with a gain of 54.6% year to date (YTD) compared with 16.7% and 31.7% growth of the S&P 500 composite and the sub-industry, respectively.

Cirrus Logic is a fabless semiconductor supplier that develops low-power, high-precision mixed-signal processing solutions. The company focuses on expanding markets where CRUS can apply its high-precision, low-power mixed-signal processing knowledge to address challenging issues across the analog-to-digital divide.

Cirrus Logic's performance is driven by accretive investment and product launches. Last month, CRUS launched its latest lineup of digital-to-analog converters (DACs) and an ultra-high-performance audio CODEC. These innovative solutions are specifically crafted for recording artists, live performers and audiophiles, delivering uncompromising sound quality and exceptional performance.

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The new additions to the Pro Audio family include the 8-channel DAC CS4308P, 4-channel CS4304P, 2-channel CS4302P and CODEC CS4282P. These devices offer top-notch performance, minimal power consumption and features like hybrid gain control to address the pressing audio challenges that have been rooted in the industry for a long time.

The company plans to make investments in the advanced battery and power technology market related to high-efficiency charging, battery management and system-side power delivery. Apart from this, Cirrus Logic plans to launch its next-generation custom-boosted amplifier and first 22-nanometer smart codec later in fall 2024.

These new products should significantly improve the performance of the prior generations. Owing to these factors, the company expects High-Performance Mixed-Signal and Audio SAM to cross $5.7 and $3.3 billion by 2028.

Growing momentum in the laptop market and increasing win designs with customers on next-generation flagship smartphones with its general market audio components bode well.

For first-quarter fiscal 2025, management expects revenues between $290 million and $350 million. The Zacks Consensus Estimate is pegged at $317.7 million.

Combined R&D and SG&A are anticipated to be between $142 million and $148 million, respectively. The gross margin is expected to be in the range of 49-51%.

Strong Balance Sheet

Cirrus Logic is a cash-rich company with a strong balance sheet. As of Mar 31, 2024, the company had cash and cash equivalents and marketable securities of $526.5 million with no long-term debt. Since CRUS has net cash available on its balance sheet, the existing cash can be used for pursuing strategic acquisitions, investment in growth initiatives and distribution to its shareholders.

In the fiscal fourth quarter, the company reported $170.5 million of cash flow from operations. In the prior-year quarter, it generated $48.3 million of net cash from operations. Free cash flow was $162.8 million.

Cirrus Logic has enhanced its shareholders' wealth through share repurchases. The company repurchased 548,000 shares worth $50 million in the last reported quarter. In fiscal 2024, it bought back shares worth $186 million. As of Mar 30, 2024, CRUS had $315.1 million worth of shares remaining under its existing share repurchase authorization. Share repurchasing is a good way to enhance its shareholders' wealth while boosting the company's earnings. Cirrus Logic's ability to generate solid cash flows is expected to help it sustain current share repurchases, at least in the near term.

Headwinds Persist

The reduction of general market and custom components, especially in non-smartphone applications, is hindering its performance. Stiff rivalry and volatile forex movement amid uncertain macroeconomic conditions are headwinds for this Zacks Rank #3 (Hold) company.

For fiscal 2025, CRUS expects elevated inventory levels to meet rising customer demand and fulfill wafer purchase commitments in line with its long-term capacity agreement with GlobalFoundries.

Stocks to Consider

Some better-ranked stocks worth consideration in the broader technology space are NVIDIA Corporation, Onto Innovation ONTO and Woodward WWD. While NVIDIA and Onto Innovation currently sport a Zacks Rank #1 (Strong Buy) each, Woodward carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for NVIDIA's fiscal 2025 EPS is pegged at $2.68. NVIDIA's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 18.4%. The long-term earnings growth rate is 37.6%. Shares of NVDA have risen 204.7% in the past year.

The Zacks Consensus Estimate for Onto Innovation's 2024 EPS is pegged at $5.05, unchanged in the past 30 days. ONTO's earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average surprise being 2.6%. Shares of ONTO have gained 108.8% in the past year.

The Zacks Consensus Estimate for Woodward's fiscal 2024 EPS has remained unchanged in the past 30 days at $5.88. WWD's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 26.1%. The long-term earnings growth rate is 16.5%. Shares of WWD have risen 49.2% in the past year.

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