Cirrus Logic: Why This Chart Is Telling You It's Time To Buy

Summary

• Cirrus Logic’s largest client, Apple, represents 75% of its revenues.
• Cirrus' and Apple’s stock performances are positively correlated 66% of the time.
• Since April 29th, there is a 50% disparity between Apple's and Cirrus’ stock prices.
• Cirrus is 31% off its 52-week high of 91.63 (using current price of $63).
• We expect a 40% near-term rebound in Cirrus stock price.

This article is written by Euphoric Investment authors Austin Weiermiller, Zach Thomas and Youbeen Baek.

What is Cirrus Logic (NASDAQ:CRUS)?

In short? A semiconductor play on iPhone 12 that could potentially knock your SOXX off.

Cirrus Logic: A Leading Provider of Amplifier Semiconductor Chips

Cirrus Logic, Inc. is a fabless semiconductor company that provides sound and audio technologies to some of the largest smartphone and smart home OEMs in the world.

Fabless manufacturing is the design and sale of hardware devices and semiconductor chips and outsourcing their fabrication (or "fab") to a specialized manufacturer called a semiconductor foundry. Foundries are typically, but not exclusively, located in China and Taiwan. Fabless companies can benefit from lower capital costs while concentrating their research and development resources on the end market.

Cirrus' and Apple’s Relationship

Cirrus Logic and Apple (AAPL) have a strategic business relationship reliant on one of Apple’s core beliefs: making products with unmatched sound quality. Since 2012, Apple has been using Cirrus Logic’s amplifiers in numerous product lines, with the iPhone generating the bulk of the revenues. Between Cirrus’ entrance in 2012 and 2019, an estimated 1.31 billion iPhones have been sold, with Apple possessing 45% of the US smartphone market. We consider the prospects of Apple producing amplifiers in-house as a highly improbable threat. We also consider other semiconductor OEMs to pose a minimal threat of competition due to Cirrus’s robust portfolio of over 3,400 patents. This creates a strong moat for Cirrus’s future revenues and a high barrier of entry for emerging competition.

Yes, it is true that Cirrus is highly dependent upon unit sales of Apple products. In fact, CRUS' and AAPL’s stock performances have been positively correlated 66% of the time since 2010.

Charts

*Source: Koyfin

Prior to this year, there have only been two opportunities during

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.