Cirrus Logic (CRUS)

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UPDATE: Cirrus Logic Shares Soar on Big Hopes for Apple Devices

Jul 31, 2012 11:39:26 (ET)


--Cirrus Logic shares soar following strong guidance for the second half of 2012

--Chip maker counts Apple as its biggest customer

--Analysts say bullish view can indicate a new iPhone and potential mini iPad

(Adds analysts' comments in 13th to 15th paragraphs.)



By Shara Tibken

Cirrus Logic Inc.'s (CRUS) bullish growth targets for the back half of the calendar year sent shares soaring Tuesday and heightened anticipation for new devices from major customer Apple Inc. (AAPL).

Cirrus Logic, which makes audio and energy chips for smartphones and other devices, late Monday said its revenue should surge about 70% to 90% sequentially in the current period and again grow significantly in the December quarter. The company, whose guidance was much better than analysts anticipated, is benefiting in particular from its position as a major audio chip supplier to Apple.

"Across the board, we're seeing some great things for the devices we've developed in the past year," Chief Executive Jason Rhode said during a conference call, according to a FactSet transcript.

The news sent Cirrus shares up 23% to $36.76 in recent trading, and they have more than doubled in value over the past 12 months. Apple shares were up 2.5% to $609.59 in recent trading and have gained 56% over the past 12 months.

Cirrus on Monday projected revenue of $170 million to $190 million in the fiscal second quarter, well above the first quarter's $99 million and the $130 million estimated by analysts, according to Thomson Reuters. Its fiscal first-quarter results were largely in line with expectations.

CapStone Investments analyst Jeff Schreiner said Cirrus's September-quarter guidance likely "left many with their jaws hanging wide open." He added that with Apple's product launches moving closer in coming months, visibility into Cirrus's fiscal 2013 growth has likely increased.

"Investors should likely 'pay up' for [Cirrus's] near-term growth, as potential for revisions higher still remain in place," Mr. Schreiner said.

Cirrus took pains to avoid talking about Apple during its conference call. The company derives more than half of its revenue from Apple, but it doesn't discuss the partnership or even mention Apple's name during its earnings calls, simply referring to the consumer electronics giant as a major customer.

"While we understand there is intense market interest related to our largest customer, in accordance with our policy, we do not discuss specifics about our business relationship," Mr. Rhode said.

Apple wasn't immediately available to comment.

Nevertheless, analysts consider Cirrus to be a gauge on Apple device production and a way to gain exposure to Apple without actually buying the Cupertino, Calif., company's shares. On Tuesday, the analysts took Cirrus's bullish guidance as an indication of ramped-up business at Apple, as the company prepares to release a new iPhone.

Media reports Monday pegged mid-September for the launch of the new phone, and there is speculation Apple also will release a mini iPad at that time.

Cirrus's bullish guidance could lend weight to expectations for a smaller iPad, Raymond James analyst Tavis McCourt said. Some of Apple's other suppliers--such as Qualcomm Inc. (QCOM), TriQuint Semiconductor Inc. (TQNT) and Skyworks Solutions Inc. (SWKS)--didn't provide as strong guidance, which Mr. McCourt said in part could be because WiFi-only tablets largely don't use their components. A smaller iPad would include "meaningful Cirrus content," he said.

"In our opinion, the Cirrus guidance does not guarantee an iPhone 5 launch in September, but it certainly guarantees large builds for a commercial launch when it comes and likely guarantees a meaningful 7-inch iPad/iPod launch as well," Mr. McCourt noted.

TriQuint shares recently climbed 4.6% to $5.64, while Skyworks grew 7.9% to $30.04. Qualcomm edged up 1.5% to $60.02.

Meanwhile, Barclays Capital analyst C.J. Muse said the strong top-line guidance confirms his belief that iPhone 5 production is well under way. He said that should ease investor concerns on the near-term outlook for other semiconductor companies tied to Apple, such as MagnaChip Semiconductor Corp. (MX). MagnaChip's shares recently jumped 8% to $9.73.

And Topeka Capital Markets analyst Brian White noted it will be tough for Apple investors to ignore the big fiscal second-quarter outlook from Cirrus. He said the midpoint of guidance represents an 82% sequential rise and is well above the average of 23% sequential growth for September quarters over the past five years.

"In fact, this represents the biggest sequential sales uptick for Cirrus Logic that we have on record," for the past 10 years, Mr. White noted.

Write to Shara Tibken at [e-mail]

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July 31, 2012 11:39 ET (15:39 GMT)