Semiconductor specialist Cirrus Logic (NASDAQ: CRUS) is not going to be a household name like a number of of its industry peers, but the company has done impressively well available available on the market thus far this 12 months with gains of 69% as of this writing.
Cirrus, which is believed for supplying chips for Apple‘s (NASDAQ: AAPL) products, has outpaced the broader Nasdaq-100 Technology Sector index’s gains of 10% by an infinite margin. The good news is that Cirrus’ outstanding growth is here to stay, and the company could finish the 12 months strongly on account of its largest customer. What’s more, the arrival of artificial intelligence (AI)-enabled smartphones is liable to unlock a big long-term growth opportunity for Cirrus Logic.
Let’s take a more in-depth have a take a look at the the reason why investors should consider buying Cirrus Logic stock hand over fist before it’s too late.
Cirrus Logic’s recent results point toward a superb future
Cirrus Logic released fiscal 2025 first-quarter results (for the three months ended June 29) on Aug. 6. The company’s revenue increased 18% 12 months over 12 months to $374 million and was well ahead of the consensus estimate of $318 million. What’s more, Cirrus’ adjusted earnings jumped a solid 67% 12 months over 12 months to $1.12 per share, crushing Wall Street’s $0.61 per share estimate.
The positive news didn’t end here, as Cirrus expects its fiscal Q2 revenue to land between $490 million and $550 million. The midpoint of the guidance range stands at $520 million, and that’s well above the Wall Street estimate of $485 million. Cirrus clocked revenue of $481 million within the similar quarter last 12 months, indicating that its top line is on the proper track to increase by 8% on a year-over-year basis.
Cirrus’ top line could land closer to the upper end of its guidance range on account of its largest customer, Apple, which accounted for a whopping 88% of its top line last quarter. Cirrus management identified on the recent earnings conference call that its revenue exceeded the very best end of its original guidance range on account of “stronger than expected shipments into smartphones.”
Because Apple is Cirrus’ largest customer, the stronger-than-expected performance signifies that Cirrus got more orders for its chips last quarter. That is just not surprising, as Apple appears to be preparing for an aggressive rollout of its next-generation iPhones which is likely to be all set to support generative AI features.
Apple’s rumored iPhone 16 is anticipated to hit the market next month and the tech giant is anticipated to ship 90 million units of its updated smartphone lineup this 12 months. That will likely be a ten% increase over last 12 months. But on the similar time, supply chain reports indicate that Apple is stocking up on 120 million display panels, suggesting that it’d end up manufacturing more units than what the market is currently anticipating.
If that’s indeed the case, Cirrus Logic’s growth in the current quarter is liable to exceed expectations over again. But more importantly, the blending of the Apple Intelligence suite of generative AI features into the tech giant’s upcoming smartphones is anticipated to trigger a solid upgrade cycle. Apple’s smartphone shipments are expected to increase by 10% in fiscal years 2025 and 2026, in accordance with JPMorgan‘s estimates.
Cirrus is anticipated to land more dollar content in the next generation of iPhones, which suggests that it must have the flexibility to receive more revenue from each unit of the iPhone that Apple produces. So, the stage seems set for Cirrus Logic to complete the 12 months strongly, and it must have the flexibility to sustain its newly found momentum in the long term as well on account of Apple’s entry into the AI smartphone market, an area that’s currently in its early phases of growth.
A pair more reasons to buy the stock
Analysts have been quick to lift their earnings growth expectations for Cirrus Logic, as is obvious from the chart below.
Cirrus Logic finished fiscal 2024 (ended on March 30) with non-GAAP earnings of $6.59 per share. The above chart tells us that analysts weren’t expecting an increase in Cirrus’ earnings in the current fiscal 12 months, but that has modified of late. Furthermore, the company’s bottom-line growth forecast for the next fiscal 12 months points toward an improvement in its growth rate.
Nevertheless, if Apple indeed decides to ramp up the production of its upcoming iPhones and Cirrus finally finally ends up supplying more content to the tech giant, there’s probability of Cirrus’ earnings easily outpacing analysts’ expectations going forward.
That’s the reason now could possibly be time for investors to buy this semiconductor stock. It’s trading at just 26 times trailing earnings, a discount to the Nasdaq-100 index’s earnings multiple of 31. And the AI-driven growth throughout the smartphone market and Cirrus’ tight relationship with considered one of the vital necessary players on this space may result in better-than-expected growth going forward.
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JPMorgan Chase is an promoting partner of The Ascent, a Motley Idiot company. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Apple and JPMorgan Chase. The Motley Idiot recommends Cirrus Logic. The Motley Idiot has a disclosure policy.
Up 69% in 2024, This Red-Hot Artificial Intelligence (AI) Growth Stock Could Keep Soaring was originally published by The Motley Idiot