Cirrus Logic Stock Rallies Because Earnings Show Its Apple Relationship Is Strong

Textual content dimension

Cirrus Logic

shares are buying and selling sharply larger Tuesday, as continued strong demand from

Apple

drove better-than-expected results for the September quarter.

Cirrus gives elements used for audio, voice, and haptic suggestions functions in cell phones, tablets, and different units—and robust outcomes seem pushed in giant measure by demand for components utilized in Apple’s just-launched iPhone 12 lineup.

For the fiscal second quarter, Cirrus (ticker: CRUS) posted income of $347.3 million, down 11% yr over yr, however up 43% sequentially—and nicely forward of the Wall Avenue analyst consensus forecast of $310.6 million. Non-GAAP earnings had been $1.26 a share, properly beating the Avenue estimate of 90 cents.

Cirrus stated “stronger-than-anticipated orders for elements delivery into smartphones, and to a lesser extent, tablets and really wi-fi headsets drove gross sales considerably above our expectations.”

---

Publication Signal-up

Assessment & Preview

Each weekday night we spotlight the consequential market information of the day and clarify what’s more likely to matter tomorrow.

---

For the December quarter, Cirrus sees income of $440 million to $480 million, up 33% sequentially and 23% yr over yr on the midpoint of the vary. The corporate stated its steerage displays “anticipated shipments of sure elements into smartphones as new product launches proceed to ramp within the again half of the calendar yr,” an obvious reference to the iPhone. “We additionally anticipate robust demand for elements delivery in tablets.”

The corporate famous that one buyer—broadly identified to be Apple (AAPL)—accounted for 82% of income within the newest quarter. “Our relationship with our largest buyer stays excellent with design exercise persevering with throughout quite a few merchandise,” the corporate stated, noting, nonetheless, that it doesn’t talk about enterprise relationship specifics.

Susquehanna Monetary Group analyst Christopher Rolland referred to as steerage “spectacular” in a analysis observe, and speculated that the corporate could possibly be producing extra income from Apple than initially disclosed. Rolland notes that along with the robust December quarter steerage, administration hinted that its March quarter outlook at this level additionally appears to be like stable.

“Given the shut relationship with Apple, shared IP, and excessive degree of execution in delivering high quality merchandise, we see this relationship as rising, not shrinking, over time,” Rolland writes. “In reality, we imagine a situation exists wherein the connection between the 2 corporations grows so giant and so tight that it finally compels Apple to make a bid for Cirrus, turning their Texas amenities into ‘Apple Austin’ or a hub for [Apple’s] customized mixed-signal silicon innovation.”

Rolland repeats his Optimistic ranking, and raised his Cirrus value goal to $95 from $86.

Oppenheimer analyst Rick Schafer writes that the robust outlook doubtless displays the delayed iPhone 12 launch. The inventory is more likely to “play catch up close to time period given stable upside outcomes,” he says, including that the momentum seems “capped till the following wave of Apple content material share positive aspects come clearly into view.” He stored his Carry out ranking.

Cirrus inventory was up 7.6% to $71.68 in current buying and selling.

Write to Eric J. Savitz at eric.savitz@barrons.com