Shares of Cirrus Logic (CRUS) are under pressure on Thursday despite the company posting better-than-expected first quarter results, with both earnings per share and revenue beating consensus estimates. Following the news, Craig-Hallum analyst Anthony Ross upgraded the stock to Buy, saying the company guided well above second quarter estimates and citing strength at Apple (AAPL), one of Cirrus' major customers. On the flip side, his peer at Bank of America downgraded Cirrus Logic to Neutral on the view that the company's announcement of full year 2023 pricing and cost pressures suggests earnings growth is likely to remain muted and below semis industry growth.
RESULTS: Cirrus Logic reported first quarter earnings per share of 54c and revenue of $277.3M, both better the expected 40c and $261.76M, respectively. "In the past quarter, Cirrus Logic accelerated both sales momentum and execution of our growth strategy. We grew revenue by 14 percent year on year, increased penetration of the Android market, began shipments with a leading laptop OEM, ramped new content in anticipation of product launches in the latter half of the year and advanced the development of a number of new components that are expected to drive future revenue growth," said John Forsyth, Cirrus Logic president and chief executive officer. "The company's recent investments in power-related products, including the acquisition of Lion Semiconductor, are expected to meaningfully expand our addressable market and continue the exciting progress we have been making in building new and strategic areas of our business. With a strong pipeline of audio and high-performance mixed-signal products ramping in the coming months, we are upbeat about the next several quarters and continue to anticipate accelerated revenue growth in FY22." For the second quarter, Cirrus Logic sees revenue of $430M-$470M, with consensus at $385.86M.
RESULTS BEAT, APPLE STRENGTH: Craig-Hallum analyst Anthony Ross upgraded Cirrus Logic to Buy from Hold with a price target of $105, up from $80, as the company guided well above second quarter estimates and is positioned to expand both in the handset and broad markets with new focus on power conversion/control ICs and haptics drivers. The analyst highlighted that Cirrus Logic reported results above estimates on higher smartphone volumes in Android, content gains in smartphones, and an uptick of sales in laptops. Additionally, the company's customer Apple reported third quarter iPhone revenue of $39.6B versus $33.5B estimates and $26.4B last year, Ross noted, adding that Apple continues to be a major customer of Cirrus Logic and strong 5G phone sales bodes well going forward.
Keeping a Buy rating on the shares, Needham analyst Rajvindra Gill raised the firm's price target on Cirrus Logic to $110 from $100. The analyst noted that the company delivered a "strong" beat and raise quarter, while its Lion acquisition should help bolster its growth strategy for the High Performance Mixed Signal segment specializing in fast charging chips, the analyst told investors in a research note of his own. Gill added that tablets and wearables are potential new markets for many Cirrus components, following laptops.
KeyBanc analyst Weston Twigg also raised the firm's price target on Cirrus Logic to $105 from $100, maintaining an Overweight rating on the shares after the company posted "strong" beat-and-raise results. The analyst highlighted that guidance reflects a meaningful increase in content in the upcoming Apple iPhone 13 due to increased camera controller and power conversion IC content. Additionally, the acquisition of Lion Semi appears to be complementary to Cirrus Logic's increased focus on growing its TAM within power, Twigg contended. However, supply constraints and higher costs are expected to pressure gross margin in 2022, he acknowledged. The analyst views this as a temporary issue and views Cirrus Logic as a compelling long-term sustainable content growth story.
MOVING TO THE SIDELINES: More bearish on the name, Bank of America analyst Vivek Arya downgraded Cirrus Logic to Neutral from Buy with a $92 price target. While he likes Cirrus' pipeline, plans for broadening into Android phones and laptops, and content gain opportunities from its Lion acquisition, the company's announcement of full year 2023 pricing and cost pressures suggests earnings growth is likely to remain muted and below semis industry growth. New iPhone content gain opportunities won't emerge until a year from now, limiting near-term catalysts, Arya argued.
PRICE ACTION: In Wednesday morning trading, shares of Cirrus Logic have dropped about 3% to $81.69.
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